M/S SATWANT AGRO ENGINEERS,BHAWANIGARH vs. DCIT, CENTRAL CIRCLE, PATIALA

आयकर अपीलीय अिधकरण,च"डीगढ़ "यायपीठ “बी” , च"डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: VIRTUAL MODE "ी आकाश दीप जैन, उपा"य" एवं "ी िव"म "सह यादव, लेखा सद"य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 753/Chd/2022 िनधा"रण वष" / Assessment Year : 2019-20 M/s Satwant Agro Engineers बनाम The DCIT Sangrur Road, Bhawanigarh, Central Circle Punjab-148026 Patiala "थायी लेखा सं./PAN NO: AANFS9148Q अपीलाथ"/Appellant ""यथ"/Respondent िनधा"रती क" ओर से/Assessee by : Shri Deepak Anand, Advocate राज"व क" ओर से/ Revenue by : Shri Dharamvir, JCIT, Sr. DR सुनवाई क" तारीख/Date of Hearing : 05/02/2024 उदघोषणा क" तारीख/Date of Pronouncement : 03/05/2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. :

This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-5, Ludhiana dt. 25/11/2022 pertaining to Assessment Year 2019-20. 2. In the present appeal, the Assessee has raised the following grounds of appeal:

covered u/s 68 instead of section 69 as assessed by Assessing Officer. The surrendered amount is neither covered u/s 68 nor u/s 69 of Income Tax Act 1961. 4. That the Ld Commissioner of Income Tax (Appeals) was not justified to reject the contention of appellant that entire sales of Rs.42,80,000.00 as unrecorded were duly credited back in partners account against which entry in books was made and is business income of appellant.

by the department and the inventory of stock was prepared. The department has not furnished any copy of the said inventory to the assessee. It is admitted fact that stock of Rs. 1,24,60,160.00 was calculated against stock in hand at Rs.1,14,60,160.00 leaving aside the exact difference of Rs.10,00,000/-. The inventory is based on following footing which is just an estimate and should not be relied as such from which actual profit were earned. i. Items not fully incorporated in the list/inventory by counting either excess item or on estimate basis. ii. The rate applied on the inventory of stock was sale rate however no rate was applied in accordance to purchase vouchers. iii. The inventory of stock is based on counting of stock within just of 10 hours with regard to about Rs.1,25,00,000 crore value. iv. The inventory was prepared not in physical presence of the proprietor as the stock was counted by different staff members of the department and it is difficult rather impossible to be present before all staff members who were counting the stock.

Tax Act are applicable. The assessee, at the time of survey, had voluntarily surrendered the above mentioned amounts in its.

Assessment Year 2018-19 i.e 31/03/2018 Rs.27,05,001.00 Assessment Year 2019-20 ie 31/03/2019 Rs. 15,75,000.00 (under question) Total Rs.42,80,001.00

That the said impounded slip pad is just an order form however the transaction amount of Rs.15,75,000.00 pertains to A.Y 2019-20, the year under question. The assessee firm made sales against that order on following dates. Sometime in this line of trade the order was booked in another name and sale bill was issued at the name which was suggested by purchaser and further with the change with the mind, the customer revised his order as per his wishes. The firm supplied the machine as per their order or revise order on following dates.

Date of invoice Invoice No Order Transaction Invoice Amount Amount 15/05/2018 SAE/000401 4,85,000.00 4,85,098.00 23/04/2018 SAE/000339 6,25,000.00 4,13,000.00 19/04/2018 SAE/000333 4,65,000.00 2,35,000.00 Total 15,75.000.00 11,33,098.00

That the assessee firm duly disclosed all facts and particulars were also before Inspecting Officer. The officer insisted for surrender which was settled at Rs.50,00,000.00 due to facts of inability of production of customer or to get verified the sales. The said amount was credited to capital account of partners of Rs. 25,00,000.00 each (in same ratio as profit) however the auditor credited this amount in profit & loss account and automatically credited in partners account. The said amount duly represents the sale transaction and was taken as business income. There is no separate entry of Rs.50,00,000.00 except the entry of Rs.42,80,000.00 and to cover up all discrepancy surrendered Rs.50,00,000.00 ie (42,80,000.00+7,20,000.00). The inspecting officer impounded the documents which were considered as sales transaction. The impounded slip pad contains sales transaction of Rs.42,80,000.00 which was surrendered alongwith other discrepancy of Rs.7,20,000. 00. The total amount of sale transaction and other discrepancy were credited in partners account i.e Rs.25,00,000.00 each. The auditor considering the sale transaction of Rs.42,80,000.00+7,20,000.00 credited the said amount of Rs.50,00,000.00 in profit & loss account.”

and found not tenable. The assessee has stated that the income surrendered amounting to Rs. 50,00,000/-has been credited in profit & loss account. It is pertinent to mention here that the heads of surrender of additional income amounting to Rs. 50,00,000/- on account of unexplained capital introduced found during the survey relate to the unexplained investment within the meaning of section 69 of the act for which the provisions of section 115BBE of the Income tax Act are applicable. Further, the assessee itself agreed to the amounts of surrender income vide voluntary letter of surrender reproduced above. The assessee has claimed that it has surrendered an income of Rs. 50,00,000/- on account of unaccounted sales amounting to Rs. 42,80,001/-. On the perusal of surrender letter, the contentions of the assessee are found to be false. The same is accordingly rejected. On the perusal of the surrender letter 17.04.2018, it is observed that assessee was not able to furnish any satisfactory explanation regarding the source of capital introduced, which was noticed during survey and accordingly an additional income of Rs. 50,00,000/- was disclosed by the assessee. Such unrecorded and unexplained capital introduced is an unexplained investment and hence deemed income within the meaning of section 69 of the act. However, while filing the Income tax return for the relevant period at a much later date, the assessee has disclosed such additional income as income from business. Such contention of the assessee is not supported by any documentary evidence. Hence, the contention of the assessee is not tenable and is accordingly rejected. The additional income of Rs. 50,00,000/- is removed from the profit & loss account and is added to income u/s 69 for the relevant period.

objected to apply section 69A read with section 115BBE of Income Tax Act 1961.”

“5.2 Grounds of Appeal Nos. 2, 4, 7 & 8 relate to addition of Rs. 10,00,000/-on account of excess stock & Rs. 9,66,000/- on account of difference in cash between cash found or cash-in-hand as per books of accounts found during the course of survey proceedings. The said surrender was made during the course of survey on account of discrepancies noticed in the stock & cash of the assessee. The AR in his submissions has tried to justify the same as unexplained investment out of the business income of the assessee. The AR has claimed that the appellant is not having any other source of income, but income arising from business. Further, the AR has relied upon judgments as quoted in his submissions. The contentions of the assessee have been examined. The judgments quoted by the AR have been gone through. It is important to emphasize here that in all the judgments quoted by the AR in his support, the Hon'ble High Courts/Ld. Tribunal Benches have very clearly held out that the AO shall give an opportunity to the assessee to establish a linkage between the surrendered income with the business income, if any. If the assessee is able to do that then the income can be considered as from business. In the case of the assessee, no linkage between the surrendered income under the head of 'excess stock' & 'cash' and the business income could be established as the assessee could not establish a direct nexus between the two. Hence, from above discussion, it is clear that in all the cases, the settled position of law is that the nexus between the surrendered income and business needs to be established before the same can be treated as income from business. Merely having a known business activity will not, per se, render any unexplained asset/ income as business/profession income u/s 14, unless the burden of proving the source u/s 68 to 69D is also discharged. The onus of proving that such receipts are from an activity other than disclosed business activities is not upon the AO. Therefore, there can be no presumption against the deeming fiction u/s 68 to 69D to hold that income/investment, whose source is not explained, will still be classified as income under any head u/s 14. It would be, therefore, impermissible to attempt and classify such incomes under any of specific heads, even if there is any activity which can be remotely/indirectly linked to such deemed income. The word 'source' in the same context would refer to nexus of such income generating activity/transaction with name and identity, creditworthiness of person with whom such activity/transaction was done along with proving the genuineness of transaction also. The requirement of proving these 3 essential ingredients to prove the source in order to escape the rigors of the deeming fiction has been upheld universally. The conjoint burden of proving the 'nature and source' is therefore, not restricted to merely claiming the nexus of any activity/transaction to a particular credit/income/asset but also requires to establish with cogent evidence the nexus of such activity/transaction with source also by providing the name and identity, creditworthiness of person with whom the activity/ transaction was done along with proving the genuineness of transaction. Thus, for the unrecorded excess investment in stock and excess cash found during survey proceedings, there can be no presumption to treat the value representing such excess investment in stock and excess cash as application of business income in absence of any evidence of earning that income or details as to when, how and from whom such income was derived which has been invested in stock or generated the excess cash. The AR has contended that the nature of the income has been duly explained during the course of survey as well as assessment proceedings. This contention of the AR is not found correct as nowhere during the assessment proceedings, the AR has been able to establish nexus between the investment in stock and normal business income. Further, the AR has contended that the assessee has carried out no activity other than business so there is no question of the investment in stock/excess cash being related to unexplained sources. In above context, it is important to see that the assessee has not been able to produce any documentary evidence, bills, vouchers, purchase & sale, documents to justify the additional income on account of excess stock/excess cash as related to business. If the AR is sure about the business nature of the receipts invested in stock/generated in cash necessary documentary evidence should have been adduced. In the above grounds of appeal, the AR has contended that provisions of Section 115BBE are not applicable to the case of the assessee. Ongoing through the surrender letter on the letter head of Satwant Agro Tech dated 17.04.2018, it is seen that the tax on the disclosure during the survey has been offered as per provisions of Section 115BBE. It was only later on during the filing of return that the assessee changed his mind and brought the same under normal business income. In response to question No. 19 during the course of statement during the survey, the assessee said as under: "I further state that I voluntarily surrendered a total of Rs. 69,60,000/- over and above my normal business income relevant to AY 2019-20. I will pay the tax @77.26% on the surrendered amount as per the surrender letter." From the above, it is clear that the assessee had himself offered the said surrender to tax u/s 115BBE but later on retracted from the commitment. In the case of PCIT vs. M/s. Khushi Barja & Sons Pvt. Ltd., the Hon'ble High Court of Punjab & Haryana in ITASoTI26 of 2015 dated 21.07.2016 held as under: "It is not necessary that the surrendered amount is from business income. It could be on account of any other transaction legal or otherwise. Merely because an assessee carries on certain business, it does not necessarily follow that the amounts surrendered by him are on account of its business transactions. There is no presumption that absent anything else an amount surrendered by an assessee is his business income. It is for the assessee to establish the source of such surrendered amount." In the case of SVS Oil Mills vs. ACIT, Chennai, the Hon'ble High Court of Madrasin ITA No. 765 of 2018 dated 26.03.2019, held in para 9 of the order, as under: "When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because such purchases had already been recorded in the books of accounts of the Assessee. Therefore, the excess stock, per se, has to be naturally brought to tax as 'undisclosed income' by itself and there is no question of any corresponding deduction from that in such cases." 27.04.2011, the Hon'ble High Court of Punjab & Haryana held that, where the amount surrendered during the survey was not reflected in the books of accounts and the source from where it was derived was not declared, the same was assessable as deemed income u/s 69A of the Act. The Hon'ble Supreme Court in the cases of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC) and Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC) held that the law is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. Where the nature and source of a receipt, whether it be of money or other properly, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies n the revenue to show that the income is from any particular source. It has further been held by the Hon'ble Supreme Court in CIT vs. M Ganpati Mudaliar [1964] 53 ITR 623 and A Govindrajulu Mudaliar vs. CIT [1958] 34 ITR 807 that "when the assessee has failed to prove satisfactorily the source and nature of the credit entry in his books and it is held that the relevant amount is income of the assessee, it is not necessary for the department to locate its exact source." The above observations also get support from the decision of Hon'ble ITAT Cochin Bench, Cochin in the case of M/s. Elhima Jewellers vs. PCIT Kozhikode in ITA No. 208/Coch/2018, Assessment Year 2013-14 vide order dated 20.08.2018. The relevant para of this order is reproduced below:-

"6. 2. The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income of the nature covered under the scheme of sections 69, 69A and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B & 69C in view of the scheme of those provisions.

computation of income arising from known sources/heads of income whereas Chapter VI, on the other hand, contemplates aggregation of the entire sum the nature and sources of which are not known. The aforesaid two Chapters are completely different in their nature, scope and effect. Though the income assessable under them are part of total income as defined in sections 2(45)/4/5 of the I T . Act yet that does not mean that income assessable under section 68 has to be assessed under section 56. In the case before us, source of unexplained cash credits is not known and hence they cannot be linked to any known source/head of income including income from other sources. In order to constitute 'income from 'other sources', the source, namely, the "other sources", has to be identified. Income from unexplained or unknown sources cannot therefore be considered or taxed as income from other sources. The aforesaid view is fortified by the judgement of the Hon'ble Gujarat High Court in Fakir Mohamed Haji Hasan V. CIT [2001] 247 ITR 290/[2002] 120 Taxman 11 in which the Hon'ble High Court has held as under:- "The scheme of sections 69,69A, 69B and 69C of the Income-tax Act 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc. owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of the assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from "other sources" which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any of those heads by virtue of a satisfactory explanation being given, then these provisions of actions 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatically be attracted. The opening words of section 14 are "Save as otherwise provided by this Act" clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from "other sources" because the provisions of sections 69,69A, 69B and 69C treat unexplained investment, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained, Therefore, in these cases, the source not being

known, such deemed income will not fall even under the head 'Income frc other sources". Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of sections 69,69A, 69A and 69C of the Act in view of the scheme of those provisions." Accordingly, the arguments of the AR that the surrendered income is to be treated as business income of the assessee is not acceptable and the additions made u/s 69, are to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The AR has not been able to adduce documentary evidence to establish the nexus between the surrendered income and business and no source for the surrendered income could not related to. The judgments cited supra i.e.: (1) Fakir Mohammed Haji Hasan Vs. CIT ([2001] 247 ITR 290 (Guj.) (2) PCIT vs. M/s. Khushi Ram & Sons Pvt. Ltd., the Hon'ble High Court of Punjab & Haryana in ITA No. 126 of 2015 dated 21.07.2016 (3) SVS Oil Mills vs. ACIT, Chennai, the Hon'ble High Court of Madras in ITA No. 765 of 2018 dated 26.03.2019 (4) Kim Pharma Pvt. Ltd. vs. CIT in ITA No. 106 of 2011 dated 27.04.2011, (5) The Hon'ble Supreme Court in the cases of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC) (6) Hon'ble Supreme Court in CIT vs. M Ganpati Mudaliar [1964] 53 ITR 623 and A Govindrajulu Mudaliar vs. CIT [1958] 34 ITR 807 (7) Hon'ble ITAT Cochin Bench, Cochin in the case of M/s. Bhima Jewellers vs. PCIT Kozhikode in ITA No. 208/Coch/2018, Assessment Year 2013-14 also bring out a clear legal position that for any income to be treated as business income, the nexus/the source, has to be established. 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 69 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. 10,00,000/- & Rs. 9,66,000/- on account of unexplained investment in stock and on account of difference in cash found during the survey as deemed income u/s 69/69A and to be taxed as per provisions of Section 115BBE of the Income Tax Act, 1961 and hence the same is confirmed.

was issued to the assessee to explain as to why the said credit in the books of accounts/capital account should not be treated as deemed income u/s 68. The AR in response to the same submitted that the powers of Commissioner Appeal are restricted to confirm, reduce, enhance or annul the assessment order. Hence, the AR contended that no action to assess the deemed income u/s 68 can be taken by the CIT(A). The AR also submitted a number of judgments in his support which are part of the submissions. The credit of Rs. 50 lacs is there in the capital account of the firm shown as Rs. 25 lacs each from the individual partners. The assessee surrendered the same during the course of survey as no explanation regarding the source & the nature of the said credits could be offered. The AO treated the same as deemed income u/s 69. The AR has vehemently opposed the addition made u/s 69 as well as the show-cause issued by this office to assess the said credit u/s 68 of the Income Tax Act, 1961. A bare reading of Section 68 suggests that there has to be a credit in the books maintained by the assessee and the assessee offers no explanation about the nature & source of such credits or the explanation is not satisfactory, then the Assessing Officer can assess the same as deemed income u/s 68 of the Income Tax Act, 1961. The provision of Section 68 are squarely applicable to the case of the assessee as the credit is there in the capital account of the firm and the assessee has no justification to explain its source or nature. The Hon'ble High Court of Punjab & Haryana in the case of Gumani Ram Siri Ram vs. CIT [1975] 98 ITR 337 held that" the language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand." Also, the Hon'ble MP in the case of CIT vs. Shiv Shakti Timbers [1997] 90 taxman 349 held that "a close reading of Section 68 & 69 makes it clear that in the case of Section 68 there should be a credit entry in the books of accounts whereas in the Section 69 where may not be an entry in the books of accounts." In the case of Roshan Di Hatti vs. CIT [1977] 107 ITR 938, the Hon'ble Supreme Court held that "the onus of proving the source of some of money found to have been received by an assessee is on him." In the case of Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1, the Hon'ble Supreme Court held that "where the nature & source of an receipt cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is income of the assessee and no further burden on the revenue show that the income is from any other particular source." It has further been held by the Hon'ble Supreme Court in CIT vs. M Ganpati Mudaliar [1964] 53 ITR 623 and A Govindrajulu Mudaliar vs. CIT [1958] 34 ITR 807 that "when the assessee has failed to prove satisfactorily the source and nature of the credit entry in his books and it is held that the relevant amount is income of the assessee, it is not necessary for the department to locate its exact source." The assessee has relied upon the judgment of Ld. ITAT Bench in the case of Gandhi Ram Village Sularharat in ITA No. 121/Chandi/2021. The said judgment relates to the issue of juri iction of PCIT u/s 263 and not exactly related to the issue under hand. The assessee has further relied on the judgment of Hon'ble Rajasthan High Court reported at 165 ITR 453. In this case, the issue related to additions made in the trading results of the assessee which are not applicable to the present case. The judgment of Hon'ble High Court of Punjab & Haryana reported at 310 ITR 75 as submitted by the AR in his support buttresses the stand of this office that when the assessee offers no explanation about a credit the same has to be treated as deemed income u/s 68. The judgments of Allahabad High Court (117 ITR 316), Punjab & Haryana High Court (367 ITR 281) and Ahmedabad Tribunal Bench (ITA No. 2 of 2013) have also been quoted by the AR in support of his case. The assessee is supposed to explain the nature of credits in the capital account of the firm. The assessee cannot shift the onus directly to the partners of the firm to avoid the due process of law. The Hon'ble High Court of Rajasthan In the case of CIT v. Kishorilal Santoshllal [1995] 216 ITR 9 (Raj.) held that "there is no distinction between the cash credit existing in the books of the firm, whether it is of a partner or of a third party; (ii) the burden to prove the identity, capacity and genuineness has to be on the assessee; (Hi) if the cash credit is not satisfactorily explained, the ITO will be justified to treat it as income from undisclosed sources; (iv) the firm has to establish that the amount was actually given by the lender; (v) the genuineness and regularity in the maintenance of the account has to be taken into consideration by the taxing authorities; (vi) if the explanation is not supported by any documentary or other evidence, then the deeming fiction created by section 68 can be invoked; (vii) simply because the amount is credited in the books of the firm in the partner's capital account, it cannot be said that it is not the undisclosed income of the firm and that in all cases it has to be assessed as an undisclosed income of the partner alone"

Also, the Hon'ble High Court of Jammu & Kashmir in the case of Commissioner of Income-tax vs. Construction Engineers reported in [2017] 83 taxmann.com 268 (Jammu & Kashmir) in which it has been held that "In course of assessment, Assessing Officer noted that certain amount was credited to capital accounts of partners of assessee-firm - Assessee's case was that said amount represented agricultural income of partners - Since assessee did not furnish any sort of evidence with regard to alleged agricultural income, Assessing Officer added said amount to assessee's income - Commissioner (Appeals) directed that addition made by Assessing Officer could be deleted only after verifying assessment records of partners that said income had been properly assessed in hands of partners - Tribunal, however, concluded that Assessing Officer could not make any addition in hands of assessee firm, even if such capital invested remained unexplained - Whether once a credit in books of assessee is found to be unexplained, a presumption is drawn against assessee in terms of section 68 that said credit is part of income of assessee unless it is rebutted by producing relevant cogent evidence on record - Held, yes - Whether in view of aforesaid legal position, impugned order passed by Tribunal was to be set-aside and that of Commissioner (Appeals) was to be upheld - Held, yes" Further, it has been held by the Ld. Hyderabad Bench 'A' in the case of ACIT vs. Durga Granites reported in reported in [2022] 138 taxmann.com 335

(Hyderabad - Trib.) that "During course of scrutiny assessment proceedings, Assessing Officer observed that partners of assessee firm had introduced cash in form of capital and by way of loan from partners into firm, however, since source for amount introduced in firm as capital and loan was not properly explained, Assessing Officer added same in hands of assessee as unexplained credit under section 68 - Whether therefore, onus was on assessee firm to establish genuineness of cash introduced in books of assessee firm - Held, yes - Whether since assessee firm had failed to establish source and genuineness of cash introduced in its books, addition made in hands of assessee firm was justified - Held, yes" Hence, the addition of capital in the hands of the firm u/s 68 is justified, POWERS OF CIT(A) The AR has also questioned the powers of CIT(A) to modify the section under which the deemed income is to be assessed. The Hon'ble Supreme Court in the case of CIT vs. Kanpur Coals Syndicate [1964] 53 ITR 225 has held that "the appellate Commissioner has plenary powers in disposing of an appeal. The Hon'ble Court further held that the scope of the power of CIT(A) is coterminous with the AO."

The Hon'ble High Court of Karnataka in the case of CIT vs. K. S. Dattatreya [2011] 197 taxman 151 has held that "as a revisional authority commissioner appeals can revise not only the ultimate computation arrived at but every process which lead to the ultimate computation or assessment". The Hon'ble Kerala High Court in the case of V. Subramonia Aiyr vs. CIT [1978] 113 ITR 685 held that "the power conferred on Appellate Authority by Section 2 which is exercised in accordance with procedure with Section 250 indicate and amplitude and width which is no less wide than that of an ITO and the Appellate Authority could substitute the order of the ITO by one of his own." From the above, it is very clear that the powers of CIT(A) are coterminous with that of the AO. Hence, the credit in the capital account of the assessee is treated as deemed income u/s 68 of the Income Tax Act, 1961. Penalty proceedings are initiated u/s 271AAC of the Income Tax Act, 1961. The AR has also submitted that the addition in the partner's capita! account of Rs. 50 lacs should be considered as explained under the unaccounted sales transactions of Rs. 42.80 lacs in the impounded documents and other discrepancies of Rs. 7.2 lacs found during the course of survey. The above facts have been verified from the statement recorded during the course of survey. It is seen that nowhere during the course of survey, the partner of the firm gave the statement that the unexplained credits in the capital account should be considered in lieu of the unaccounted sales reflected in the impounded documents. It is very clearly an afterthought whereby the assessee wants to claim the benefit of unrecorded sales being considered as part of the surrender made under the head of addition to partner's capital account. Hence, the above contentions of the AR cannot be accepted and is liable to be rejected. In above circumstances, the contention to adjust the unaccounted sales as part of the addition in partner's capital cannot be accepted. The ground of appeal is accordingly dismissed.

This was so decided in the case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC). It has also been held in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194, 196 (SC) that "whether in a given case the Assessing Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case." It has been held in the case of CIT vs. Maduri Rajaiahgari Kistaiah [1979] 120 ITR 294 (AP) that "where the unexplained cash credits are not referable to the business income of the assessee which was estimated, the Assessing Officer is not precluded from treating the unexplained cash credit is income from any other source." Hence, the AO was very well justified in rejecting the books of accounts as well as making the necessary addition of deemed income. Hence these grounds of appeal are partly allowed.”

“That the assessment in this case was completed u/s 143(3) vide order dated 27/09/2021 by ACIT/DCIT Central Circle, Patiala. The assessed income is amounting to Rs.96,15,250.00 against total returned income of Rs.72,80,250. 00. The order passed u/s 143(3) reveals that there is an addition of Rs.23,35,000.00 on account of unaccounted sales and surrendered income was assessed u/s 69 read with section 115BBE of Income Tax Act 1961 which was disclosed by the assessee as "business income". The assessee firm filed the return declaring the business income of Rs.72,80,250.00 which included the surrendered amouat of Rs.69,66,000. 00. The income of Rs.69,66,000.00 (surrendered amount) has been declared voluntarily in return of income as per surrender letter, however the Assessing Officer treated surrendered income of Rs.69,66,000.00 u/s 69 and 69 A read with section 115BBE of Income Tax Act 1961. The Assessing Officer had not assessed the income under any head of income and had not mentioned under which head the Assessing Officer made the addition which is in violation of section 14 of Income Tax Act 1961. The turnover of the assessee exceeded Rs. 1,00,00,000.00 (one crore) and was compulsory audited u/s 44 AB of Income Tax Act 1961 and the auditor after going through facts of the case also concluded the entire surrendered amount as "business income". The assessee filed the appeal which is pending for adjudication and the written submission with regard to different grounds of appeal is hereby submitted & furnished.

Ground of Appeal No.2- Excess stock of Rs. 10,00,000.00

Firstly:- That during the year under question, survey u/s 133A was conducted on the business premises of firm. Stock inventory was prepared which was reconciled with stock as per books and found the difference of Rs. 10,00,000.00 which was surrendered by firm for want of evidence and in absence to explain the discrepancy. The assessee firm offered the surrender amount for taxation of firm income and on quantum there is no contest/dispute however the action of Assessing Officer invoking provision of section 69 is in dispute as the difference relates to business income of firm which has shown as "business income" in return of income. The stock position is as under.

i. Stock as per inventory prepared u/s 133A 1,24,60,160.00 ii. Stock as per books of account 1,14,60,160.00 Difference 10,00,000.00

That during the course of assessment the assessee firm contended that, "It is admitted fact that the said inventory was got signed from partner of firm which is purely based on estimate in number of goods, estimated value adopted not on the basis of purchase vouchers. These facts were narrated to Inspecting Officer however the assessee was so depressed by the threats of the department and at last in order to avoid litigation with department, the assessee firm surrendered the amount of Rs. 10,00,000.00 on account of excess stock. The additional income duly represents business income of firm. That assessing officer held that, "The contention raised by assessee persued and found not tenable (last three lines at page 4 of order) reads that, "The assessee claims the excess stock to be resultant of suppression of profit from business carried out in past thus the assessee has himself stated that he has carried out the suppression of profit and hence business receipts leading to unaccounted sales." That the finding of Assessing Officer clearly indicates that either sales or profit not shown or unaccounted pertains to firm. The assessee firm also stated "when the stock was found excess only due to estimate reasons the Assessing Officer did not come to conclusion about unexplained/unrecorded purchases of assessee. Without such finding of unrecorded purchases, the investment as per books of account cannot be treated as unexplained investment as the stock in excess may be due to more production/yield on the manufacturing of agricultural implements, (reply of assessee at page 3 last and 4). So as per facts of case it is concluded that surrendered amount is business income of firm and may be considered as "business income" and there is no justification of invoking provision of section 69 read with section 115BBE of Income Tax Act 1961. Secondly: - As per legal aspect the provision of section 69 is not applicable on following grounds. I. That entry of excess stock of Rs. 10,00,000.00 duly incorporated in books of account of the financial year. II. There is no finding about unexplained investment as no purchases were held as unrecorded in books of account moreover the year in which such excess stock pertains. III. Following decided cases in which it was held that section 69 is not applicable on the excess stock found during the survey. The value of an unexplained investment not recorded in the assessee's books of accounts may be assessed as income. (i) 237 ITR 570 SC- CIT Vs Noorjaha. (ii) 247 ITR 105- CIT Vs Satyapalan. (iii) 251 ITR 671- CIT Vs Mahim. (iv) In Gaurish Steels (P) Ltd Vs ACIT (2015) 43 ITR (Tribunal) 414 Chandigarh ITAT held, " Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of assessee. Further even the survey team has not found any source of income except business income of firm. Now following the judgment of juri ictional High Court, in the background of present case, ITAT can safely inform that apart from cash all other income surrendered may be brought to tax under the head "business income" however the cash may to be taxed under the head deemed income u/s 69 of Act (Para 14)." (v) In Dev Raj Hi-Tech Machines Ltd ITAT ASR 83 Taxman.com 15 (174 TTJ 9 ASR) held that, "In the present case also, the income surrendered was due to renovation of building, stock and advances and imprest account with director and due to cash in hand which clearly related to the business of assessee and moreover the assessee had declared such surrender over & above, the normal profit of the concern, therefor the case laws relied upon by Id DR is also in favour of asseessee. (vi) Sh. Lovish Singhal Vs ITO Shri Ganganagar ITA NO.143/JODH/2018 A.Y 2014-15 decided on 25/05/2018 ITAT Jodhpur held That "as per judicial pronouncements cites by the AR and the decision of Hon'ble Rajasthan High Court in case of " Bajrang Traders in Appeal No.258/2017 dt 12/09/20J7 I observe that Hon'ble High Court in respect of excess stock found during the course of survey and surrendered made thereof was found be taxable under the head "business and profession" Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in judicial pronouncements as discussed above. I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found u/s 69 of Income Tax Act 1961. Thus there is no justification for taxing such income u/s 115BBE of Income Tax Act 1961."

So at last it is submitted that excess stock without any finding about bogus purchases is assessable under the head "business or profession" and section 69 read with section 115BBE had wrongly invoked.

Ground of Appeal No.3-Credit entry in partner's a/c of Rs.50,00,000. 00. Credit Entry in Partners Account of Rs.50,00,000.00 (Rs.25,00,000.00 each partner) assessed u/s 69 of Income Tax Act 1961. Firstly:- During the course of survey u/s 133 A of Income Tax Act 1961, assessee firm surrendered an sum of Rs.50,00,000.00 for want of source, proof and evidence. The assessee firm paid the tax on surrendered amount, being, business income of firm however the Assessing Officer assessed this surrendered amount as income from undisclosed source treating as unexplained investment u/s 69 of Income Tax Act 1961 read with section 115BBE of Income Tax Act 1961. The order passed u/s 143(3) reads at Page 8 Para 3 as, "Further during the course of survey proceedings conducted at the assessee's business premises on 16/04/2018, ongoing through the capital account of partners, it was observed by the survey team that an additional capital of Rs.25,00,000.00 each has been introduced in capital account of both partners. In Sh. Bhagwant Singh statement recorded on oath, it was asked to explain source of capital amounting to Rs.50,00,000.00 introduced by the partners of assessee firm in their respective capital account." Held at page 11, second para of order reads, "On the perusal of the survey letter dated 17/04/2018 it is observed that assessee was not able to furnish any satisfaction explanation regarding source of capital introduced which was noticed during the survey and accordingly an additional income of Rs.50,00,000.00 was disclosed by the assessee, such unrecorded and unexplained capital introduced is an unexplained income and hence deemed income within the meaning of section 69 of Act. As per section 69 "where in any financial year immediately preceding the assessment year, the assessee has made investment which are not recorded in the books of account, if any, maintained by him for any source of income."

Section 69 of Income Tax Act 1961 states that before invoking section 69, the following condition must be fulfilled. (i) Such investment are not recorded in the books of account, if any, maintained by him for any source of income. (ii) The assessee does not offer any explanation about the nature and source of investment or the explanation offered by him is not in the opinion of the Assessing Officer satisfactory. This shows that if the above said conditions are satisfied, the value of such investment may be deemed to be the income of the assessee of such financial year. One of the fundamental differences between section 68 and this section 69 of Income Tax Act 1961 for their application is that whereas for section 68, there should be credit entry in books of account, for section 69 there should not be entry the books of account.' In Shanta Devi Vs CIT 171 ITR 532 (Pb & Haryana High Court) v. Held in all decided cases that, "The income from undisclosed source, if credited in books of account maintained by the assessee is liable to be assessed u/s 68 of Income Tax Act 1961 but if such income from undisclosed sources, though, invested had not been recorded in the assessee's books, than such income is liable to be assessed in terms of section 69 of Income Tax Act 1961. vii. In Roshan Lai Madan VS CIT 245 ITR (AT) 36 (Chandigarh) AND Jagmohan Ram Ram Chandra Vs CIT 274 ITR 405 held that, "where firms books show credit in partners name for which there is no satisfactionery explanation, section 69 is not applicable for firm's assessment." viii. In Babu Lai C Borana 298 ITR 313 Bobmay High Court held that, "where the purchase transaction is recorded in regular books of accounts and the identity of vendor is disclosed, the amount cannot be included as unexplained investment u/ 69 of Income Tax Act 1961." . Thus in this case the amount of Rs.50,00,000.00 pertains to credit entry in books of account of firm for which it was held at page 11 of order (para 1) which reads, "it is pertinent to mention here that the heads of surrender of additional income amounting to Rs.50,00,000.00 on account of unexplained capital introduced found during the survey relates to the unexplained investment within the meaning of section 69 of the Act reads with section 115BBE of Act." In following decided cases of various courts it has held that fundamental condition for invoking section 69 is that entry should not be recorded in books of account.

That the Assessing Officer treated the amount of Rs.42,80,000.00 as business income of firm leaving aside the entry of Rs.50,00,000. 00. The sale transaction was added as business income. The total entry of Rs.42,80,000.00 was related to A.Y 2018-19 & A.Y 2019-20 of Rs.27,05$00.00 & Rs.15,75,000.00 respectively. The assessing Officer made addition of Rs.23,35,000.00 against sale transaction of Rs.15,75,000.00 so in view of facts, the credit entry of Rs.50,00,000.00 which represents the sale transaction has wrongly assessed u/s 69A of Income Tax Act 1961 read with section 115BBE of Income Tax Act 1961. (i) Prashant C Sharma Vs ACIT (2015) Tax Pub (Dt) 3701 (Mumbai Tribunal. "Where amount unaccounted in books of account was assessed on substantive basis in firm's hand and amount was equally credited in both the partners in their capital account the alleged amount of unexplained cash and Jewellery was to be set off against the amount available with each of partners as stated above as such to that extent the amount of cash was to be treated as explained. Thirdly:- That the assessee firm surrendered the amount of Rs.50,00,000.00 credited in partner's capital account (Rs.25,00,000.00 each) as income however as per provision of law the credit entry should be assessed in partners account instead of firm. The assessee firm duly honoured the surrender and declared the said surrendered amount as additional income of business of firm however if Assessing Officer has changed the head of income i.e from business to unexplained investment u/s 69, then it should be considered as retreated the surrendered and should be decided as per provision of law. The provision of law and as per decided cases is that "where there is credit entry in partners account it should be assessed in individual partners hand and addition in firm is not justified in eyes of law. The surrender either shown by assessee in firm or accepted by department is against provision of law. The firm is not liable for payment of tax on said eflry. The following decided cases clearly indicate the said provision of law."

1) 263 CTR 612- Credit in partners account should not be assessed in firm. 2) 23 Income Tax Matter 37 - Partner's unexplained amount cannot be assessed in firm. 3) 282 CTR 200- Partner's capital cannot be assessed in firm. 4) Supreme Court of India held in CIT Vs Lovely Exports (P) Ltd (2009) 319 ITR (ST) 5 that, "if the share application money is received by assessee company for alleged bogus shareholder, whose names are given to Assessing Officer, then the department is free to proceed to reopen their individual assessment in accordance to with law but it cannot be regarded as undisclosed income of assessee company. 5) India Rice Mills Vs CIT 218 ITR 508.-Credit in partners account should not assessed in firm. So the credit entry in partners account is not taxable in firm as income and should be assessed in individual partners account. If contention of surrendered letter is not acceptable to department, it should be treated as retreated from surrendered and unexplained amount/investment should be assessed as per legal provision of law. In nutshell surrender amount on account of credit in partners account duly recorded in books is not assessable u/s 69 read with section 115BBE and the contention about sale transaction of Rs.42,80,000.00, the addition of surrender

should be appreciated and if Assessing Officer does not accept the version of firm, then addition of Rs.50,00,000.00 has wrongly made in firm which is assessable in partners account. The contention/version of assessee may be accepted and surrender amount may be assessed as "business income" and not u/s 69A of Income Tax Act 1961 read with section 115BBE of Income Tax. Ground of Appeal No.4-Addition on account of difference in cash. Addition of Rs.9,66,680.00 u/s 69A. During the course of survey u/s 133 A of Income Tax Act 1961 the assessee firm surrendered the amount of Rs.9,66,000.00 on account of difference in cash found and as per books of account.

(i) Actual total cash (as per para 4 of order) 11,65,546.00 (ii) Cash in hand as per books 1,99,546.00

Difference 9,66,000.00

The assessee firm surrendered the amount of Rs.9,66,000.00 and paid the tax . Now even the quantum of addition is not contested however the action of Assessing Officer of invoking section 69A is not justified in eyes of law & facts of case. The Assessing Officer rejected the books of account u/s 145(3) and made addition of Rs.23,35,000.00 on account of unrecorded sales as per impounded documents. The total sales transaction as per impounded documents is Rs.42,80,000.00 however addition pertaining to A.Y 2019-20 (year under question) of Rs.23,35,000.00 was made. The issue of cash difference is determined as under.

(i) Cash in hand as on 16/04/2018 1,99,546.00 (ii) Added sales transaction treated as 15,75,000.00 unrecorded in books out of Rs.23,35,000.00 entry of Rs.7,60,000.00 pertains to goods to be delivered on 05/04/2018. Total cash 17,74,546.00 Cash found Rs. 11,65,546.00 The total cash included opening cash with cash of unrecorded sales of Rs. 15,75,000.00 the cash in hand as per record comes to Rs. 17,74,546.00 whereas only of Rs.l 1,65,546.00 was found. At this stage it is submitted that cash is on account sales transaction of firm and Assessing officer was not justified in eyes of law and on facts for invoking section 69A of Income Tax Act 1961. The cash as explained is excess then actually found during survey operation. The assessee firm has rightly claimed the difference as business income surrendered for want to evidence. The Assessing Officer himself assessed the unrecorded sales as "business income". There is no justification of invoking provision of section 69 of Income Tax Act 1961. Ground of Appeal No.5 & 6- Addition of Rs.23,35,000.00 on account of unexplained sales. During the course of survey operation u/s 133 A at business premises of firm, slip pads were impounded which contains entries of Rs.42,80,000.00 for A.Y 2018-19 and 2019-20, the year under question however entry dt 15/03/2018 of Rs.7,60,000.00 was also considered as the goods to be delivered on 05/04/2018. The total amount (15,75,000.00+7,60,000.00) Rs.23,35,000.00 was considered as unaccounted sales. The assessee firm contended that the slip pad is just "an order form" in which advance amount is written but Assessing Officer made addition by recasting the trading account and by rejecting the books of account u/s 145(3) of Income Tax Act 1961. The addition of Rs.23,35,000.00 is highly objected in view of facts of case. Firstly:- This slip pad had already considered against surrendered amount of Rs.50,00,000. 00. The assessee could not explain the impounded documents at the time of survey due to stress of officials of departments however surrendered the same against Rs.50,00,000. 00. The separate addition of Rs.23,35,000.00 on account of slip pad is not justified. (I) CIT Vs Jaora Flour & Foods (P) Ltd (2012) 344 ITR 294 (MP) "where the unrecorded sales & cash found during survey is recorded in the books of account subsequently addition cannot be made to income as such amount is duly accounted for in books of accounts and is not income from undisclosed sources" Secondly:- This slip pad is just an order form which does not mention the exact amount of sale consideration. The advance money received by firm clearly indicates that this is not a sale voucher. The assessing Officer made addition of Rs.23,35,000.00 being unaccounted sales after rejecting the books of account u/s 145(3) of Income Tax Act 1961 which is not justified. Thirdly:- The books of account has wrongly been rejected u/s 145(3) of Income Tax Act 1961. As the said pad had been considered against surrender of Rs.50,00,000. 00. There is no other document to support the contention of Assessing Officer about rejecting of account books. No defect pointed out hence rejection of account books is not justified. Moreover assessment was completed u/s 143(3) not u/s 144 of Income Tax Act 1961. Fourthly:- Without prejudice to my argument about alleged addition, the Assessing Officer is erred in law to make addition of whole of the amount of unaccounted sales whereas only gross profit on unaccounted sales should be added as decided by various courts. The Assessing Officer has wrongly rejected the trading account in accordance to facts of case. The actual trading account for whole of the year is as under.

Pertieulars Amount Pertieulars Amount Opening Stock 9335090 Sales 145452218 Purchases 132606629 Sales upto 17/09/2018 71067343 Purchase upto 17/09/2018 57405444 Sales upto 31/03/2019 74384875 Purchase upto 31/03/2019 75201185 Closing Stock 14554995 Direct Expenses 9324798 Direct Exp. upto 17/09/2018 4305625

Direct Exp. upto 31/03/2019 5019173 Gross Profit 8740696 160007213 160007213 Gross Profit Ratio Percentage 6.00% Net Profit Ratio Percentage 4.99% (Rs.72,63,292.00)

There are various following decisions in which it was held that entire sales unaccounted/outside books of account should not form addition however only gross profit ratio percentage should be assessed as these are not to be treated/considered as unexplained investment.

“That during the course of survey u/s 133A on 16/04/2018, survey team noticed an entry of Rs.25,00,000.0 in both partners account which was duly credited on 10/04/2018. The appellant firm surrendered the amount during the course of survey operation. The firm surrendered this amount over and above any business income as per surrender letter issued by firm. The Assessing Officer assessed this surrendered amount u/s 69 of Income Tax Act 1961 whereas appellant declared this amount as "business income". During the course of assessment proceedings u/s 143(2) the Assessing Officer noticed unrecorded sales worth Rs.42,80,000.00 on the basis of 'slip pad' impounded during the course of survey operation and on that very basis books of accounts were rejected u/s 145 of Income Tax Act 1961. Now during appellate proceedings your honour asked why section 68 may not be invoked on entry of Rs.50,00,000.00 instead of section 69 as applied by Assessing Officer and further as shown by appellant as business income in books of account and return of income. The issue of applicability of section 68 is strongly objected in view of following facts.

Firstly :- That relevant entry in capital account of partner is neither credit entry u/s 68 nor unexplained investment u/s 69 of Income Tax Act 1961. Secondly :- Where books of accounts are rejected u/s 145, section 68 is not applicable. In this case (page 16 of AO's order) it reveals "Accordingly the books of accounts maintained by assessee are hereby rejected u/s 145(3) of Income Tax Act 1961 of the act for reasons mentioned below.

(i) Unaccounted transactions mentioned in Table no.l and. (ii) Failure to maintain salary/wages register." Thirdly:- That surrendered amount was already credited on 10/04/2018 i.e before survey operation on 16/04/2018. The appellant proved the source of entry of Rs.25,00,000.00 each in partners account and stated as, "The impounded slip pad contains sales transactions of Rs.42,80,000.00 which was surrendered alongwith other discrepancy of Rs.7,20,000. 00. The total amount of sales transactions & other discrepancies were credited in partners account i.e Rs.25,00,000.00 each. The auditor considering the sale transaction of Rs.42,80,000.00+7,20,000.00 credited the said amount of Rs.50,00,000.00 in profit & loss account .(Page no 10%f order).

by any word confirm, reduce, enhance or annual. The assessment can be said to have been enhanced only if the tax assessment has been enhanced as decided in CF Tarkeshwar Nath Aggarwal Vs CST 34 STC 497-decided by Allahabad High Court. Following decisions of various courts it was held that Assessing Officer should apply section 68 after application of mind & to form opinion after rejecting explanation offered by appellant.

Further it is submitted that credit entry in capital account of partners was surrendered in firm which was duly accepted by department so in case of firm the addition/surrendered amount should be assessed as business income which concludes that neither section 69 nor section 68 is applicable in this case.

In this case books of account were rejected u/s 145(3) of income tax Act 1961. There are various decided cases in which it was held that section 68 is not applicable where books of account had been rejected. .

cash credit relating to partners cannot be added in the income of the firm as its unexplained income. The High Court Held, "in our opinion, the reasons assigned by the Tribunal for deleting the additions are directly referable to the provisions of section 68 of the Act and we do not find any cogent reasons to interfere with the same merely because on a reappraisal of tllfe entire matter it may be possible to form a different opinion."

In case of Fashion Fashion World Vs. ACIT (IT Appeal No. 1634(Ahd.) of 33. 2006, dt. 12/02/2010), the Coordinate Ahmedabad Benches has held 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) ‘prof its and gains from business or prof ession’, (iv) ‘capital gains’ and (v) ‘income f rom 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 identif iable and hence adjustment was not permitted.

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 f irst 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 f rom business and not any investment as it cannot be co-related with any specific asset.

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, f alling under a particular head, then the difference should be treated as undeclared business income explaining the investment.

within exemption provided by the Act lies upon the assessee....But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the assessing officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature.”

CIT(A) has invoked the provisions of section 69 instead of section 68 of the Act and has effectively confirmed the action of the AO. The explanation of the assessee regarding impounded slip pad has however not been addressed by either of the authorities. Given that the explanation so submitted is basis the impounded slip pad which is in custody of the Revenue, it was essential that the authorities below should have examined the impounded slip pad and thereafter, decided the matter. However, we find that no finding has been recorded by either of the authorities in this regard. We therefore deem it appropriate to remand the matter back to the file of the AO to examine the same afresh and decide as per law after providing reasonable opportunity to the assessee.

आदेशानुसार/ By order, सहायक पंजीकार/