SH. KRISHAN KUMAR,KHANNA vs. DCIT, CC-1, LUDHIANA

आदेश/Order

Per A.D. Jain, Vice President:

1. That the ld. CIT(A) has erred in confirming the action of the ld. AO in holding that the provision of Section 69

175-Chd-2023– Shri Krishan Kumar, Khanna 2 r.w.s. 115BBE would be applicable on the amount surrendered during survey on account of stock to the tune of Rs. 1,00,00,000/-.

2. That the ld. CIT(A) has failed to appreciate that during the course of survey or otherwise, no such, evidence of any other activity being carried out by the assessee have been found, except the business carried on by the assessee during the course of normal business as per books of accounts.

3. That the various judgments which assessee has relied upon of the jurisdictional Chandigarh Bench of ITAT have been ignored and the order has been passed against the facts & circumstances of the case.

“That the ld. CIT(Appeals), has erred in invoking section 69 read with section 115BBE of the Income Tax Act on the excess cash of Rs. 1,34,004/- and since the excess cash was related to same business of purchase and sale of jewellery and hence the normal rate of tax should be levied on excess cash.”

175-Chd-2023– Shri Krishan Kumar, Khanna 3 declaring total income of Rs.1,08,37,187/- on 24.09.2019 including the surrendered income, which was processed u/s 143(1) and thereafter, the case of the Assessee was selected for compulsory scrutiny and notices u/s 143(2) and 142(1) were issued. During the course of assessment proceedings, the AO also issued a Show Cause Notice dated 04.02.2021 stating that as per the Surrender Letter, the Assessee has made a surrender for a sum of Rs. 1,00,00,000 on account of difference in stock and the Assessee was also asked to explain the reasons for excess cash difference of Rs. 1,34,004/-found on the day of survey.

3.1 In response to the show cause, the Assessee filed his written submissions as under:-

"26. & 27. The details of the business income offered and its utilization is as under:- Particular Debit Credit Business Income 100,00,000/- (Credited to P/L account) Gold 87,90,988/- Silver 6,69,384/- Diamond 2,75,981.62/- Cash in hand 2,63,646.38/- Total 100,00,000/- 100,00,000/-

175-Chd-2023– Shri Krishan Kumar, Khanna 4

"Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D

115BBE. 1(1) Where the total income of an assessee, (a) Includes any income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D and reflected in the return of income furnished under section 139;" The section 115BBE referred the section of 69, 69A, 69B, 69C, these sections speaks about the unexplained investment/ expenditure etc. (i) This Section is applicable where assessee's income is recorded in books but has not been offered to tax and the assessee fails to prove the nature and source to the satisfaction of the AO (in the case of the assessee the sources and the nature of the income offered is already there) (ii) This section is also applicable to the assessee who are not required to maintain books of accounts but is found to have made unexplained investment, unexplained expenditure or he is found to be in possession of money, bullion, jewellery or other valuable articles. (No unexplained investment found during the course of survey, only undisclosed business stock found, but explained) (iii) Where an assessee voluntarily shows income in his return but he is unable to prove the source of such income to the satisfaction of the AO, such income could be held to be liable under section 115BBE. (Sources of the income and satisfaction of the Assessing Officer already established during the course of survey) (iv) Further, during the course of survey proceedings, the assessee has offered a sum of Rs.1 Crore as business income on account of excess business stock of Gold, Silver & Diamond. Regarding your goodself’s query related to income offered by the Assessee amounting to Rs. 1 crore shown as Business Income in the Profit & Loss account already field with your goodself, in this regard, it is submitted that in the case of assessee, sum of Rs. 1 crore offered during the course of survey relates to same business activity of the assessee and amount was offered merely to cover the discrepancies pointed out by department of stock arising out of the trading business transactions. It is also pertinent to note that during survey proceedings, no document/ paper was found which can prove that assessee has undertaken any unexplained business other than the activities carried on by it in regular course of 175-Chd-2023– Shri Krishan Kumar, Khanna 5 business. The income offered by the assessee is out of the similar modus operandi. (v) Further, the income offered by assessee is trading income from thetrading of gold items and arising out of sale/purchase of the gold and it is nothing which the assessee has earned out of non-business activities. Therefore, what was offered during the course of survey pertains to regular business activities of the assessee and no part 01 income pertains to arising out of unexplained/unknown sources. It is also pertinent to mentioned here that the fact that income as offered during the course of survey was from regular business activity was duly found and accepted by the department during the course of survey.

Therefore, the question of the applicability of section 115BBE doesnot arise at all."

3.2 The detailed submissions and the details of the stock furnished by Assessee the were examined by the A.O. butwere found not acceptable. It was held by the A.O. that the Assesses’s ITR showed that he had maintained books of account of the relevant year and had got its accounts audited and also had offered the income of Rs. 1,00,00,000/- as surrendered income but the Assessee itself had not shown / passed the requisite accounting entries in its books of account. The Assessee had shown only resultant income on credit side of the profit and loss account. The A.O. further found that no such details have been found available on the record which substantiate the claim of the Assessee. Thus, the A.O. observed that the explanation offered regarding

175-Chd-2023– Shri Krishan Kumar, Khanna 6 nature and source thereof is not satisfactory and therefore, the value of such explained credit / stock / investment in assets /expenditure / cash, etc. were required to be taxed u/s 68 to 69D of the Act. Accordingly, excess stock of Rs. 1,00,00,000/- being unaccounted / unexplained be taxed as

per provisions of section 115BBE of the Income Tax Account.The A.O.

5. Being aggrieved, the Assessee carried the matter in appeal before the ld. CIT(A) who has sustained the said

175-Chd-2023– Shri Krishan Kumar, Khanna 7 additions. As per the ld. CIT(A), surrender was made during the course of survey on account of excess stock and investment in construction of building of the Assessee. The AR in his submissions has tried to justify the same as business transactions of the Assessee. The AR has claimed that the Assessee was not having any other source of income.

Further, the AR relied upon judgments as quoted in his submissions. The ld. CIT(A) observed as follows :

“5.1 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 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 under 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, the AO gave an opportunity to the Assessee to establish a linkage between the surrendered income under the head of excess stock & investment in construction of building and the business income.

5.2 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 diseased 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

175-Chd-2023– Shri Krishan Kumar, Khanna 8 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.

5.3 The requirement of proving these three 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.

5.4 Thus, for the excess stock & investment in construction of building found during survey proceedings, there can be no presumption to treat the value representing such excess stock & investment in construction of building 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.

5.5 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

175-Chd-2023– Shri Krishan Kumar, Khanna 9

'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 be related to.”

The ld. CIT(A) relied on – 5A

3. ‘SVS Oil Mills vs. ACIT’, Chennai, the Hon'ble High Court of Madras in 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 ‘GovindrajuluMudaliar vs. CIT’, [1958] 34 ITR 807. 7. 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 and 8. ‘ITO vs. Dulari Digital Photo Services (P) Ltd.’, [2012] 24 Taxman.com 31 (CHD).

5B It was held that these decisions 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.

175-Chd-2023– Shri Krishan Kumar, Khanna 10 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 Assessing Officer 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. 1,00,00,000/- on account of excess stock and excess cash of Rs. 1,34,004/- found during the survey as deemed income u/s 69 & 69A to be taxed as per the provisions of section 115BBE of the Act and confirmed the same by dismissing the Grounds of appeal of the Assessee.

175-Chd-2023– Shri Krishan Kumar, Khanna 11 many years and maintained complete books of account which were duly audited and on the basis of the said audited books, the Assessee filed his return of income on 24.9.2019 declaring total income of Rs. 1,08,37,190/-. The return was accompanied with the audit set of accounts.

During the course of survey u/s 133A of the Income Tax Act, 1961 on 24.01.2019, the Assessee had offered an additional income of Rs. 1,00,00,000/- as business income and was duly declared in the return of income. The same also stood accounted for in the books of account and was a part of the trading account. While framing assessment, the Assessing Officer treated the same as income to be taxed u/s 115BBE of the Act.

175-Chd-2023– Shri Krishan Kumar, Khanna 12 that the case of the Assessee was selected for compulsory scrutiny and notices u/s 143(2) and 142(1) along with detailed questionnaires were issued to the Assessee and the Assessee filed detailed response to the notices; and that no adverse material was found during the course which showed that the said excess stock was unexplained and hence, the excess stock found during the course of survey should be treated as business income of the Assessee and the provisions of section 115BBE of the Act are not applicable to the same. It is submitted that the A.O. without considering the replies filed by the Assessee made addition to the tune of Rs. 1,34,004/- to the total income on account of excess cash found and hence assessed the total income at Rs. 1,09,71,190/-. However, the Assessing Officer without appreciating the facts and reply submitted from time to time by invoking the provisions of section 69 of the Act treated the same as unexplained investments in the hands of the Assessee, which on appeal, was upheld by the ld. CIT(A). It is important to refer the provisions of section 69 which reads as under: -

“Unexplained Investments

175-Chd-2023– Shri Krishan Kumar, Khanna 13

7.1 From the bare reading of the provisions of section 69 of the Act, it is very much clear that there must be some investments not found in the books of account of the Assessee and the Assessee offered no explanation about the nature and source thereof or the explanation offered, was not in the opinion of the Assessing Officer satisfactory, then, the amount invested in the books of the Assessee be charged to Income Tax and taxed at the rate of 60%. In the instant case, the Assessee has already declared the additional investments found as business income received by it in the normal course of business. The Assessee had already discharged its obligation to prove the source of investments declared by him, onus shifted to the revenue to disapprove the same, however, the Assessing Officer simply ignoring the facts already accepted in survey and without analyzing the same, arbitrarily invoked the provisions of section 69 of the Income Tax Act.

175-Chd-2023– Shri Krishan Kumar, Khanna 14 7.2 Further, the quantum and basis of the amount surrendered had duly been stated by theAssessee in its statement recorded during survey and as declared in the return of income. The same has been accepted as it is, since the Assessing Officer nowhere denied / controverted these facts in the assessment order. The income was offered to tax which stand credited in the profit and loss account of the Assessee for the year under appeal, copy of letter declaring additional income at the time of survey was enclosed.

7.3 The Assessing Officer just simply mentioned that the submissions of the Assessee were not found acceptable as no cogent reasons supported by documentary evidence were being cited by it during survey. The same was treated as an unexplained investments u/s 69 and taxed the same at the rate of 60%, thus she failed to prove authoritatively a view taken by her and contrarily whatever the Assessee declared in the return of income. However, the income surrendered during survey was accepted by the AO at that time and the Assessee has also offered the same for taxes while filing its return of income.

175-Chd-2023– Shri Krishan Kumar, Khanna 15 7.4 In case, the investment is to be treated as unexplained, the Assessing Officer has to bring on record some conclusive evidence/ convincing finding as how the said investment is being treated as unexplained. In the circumstances, it is a bald allegation of the Assessing Officer to consider the income declared as an unexplained investment.

Further,merely based on guess work of the Assessing officer, there should not be invocation of provisions of section 69 of the Act. During the course of survey, not even an iota of evidence was found which suggests any contradiction of mode of earning by the Assessee or that the Assessee was engaged/ indulged in some other activities to generate any unaccounted income/money. During the course of assessment proceedings, the Assessing Officer never tried to point out the source of investments otherwise than as claimed by the Assessee and which allegedly considered as unexplained without reverting to the source explained, accepted and supported by the documents relating to the Assessee. As such, there is no doubt about the source of the investments as explained by the Assessee in its statement recorded during the course of survey on 05.09.2018. If the source of investments from income of business transactions

175-Chd-2023– Shri Krishan Kumar, Khanna 16 has been found satisfactory as was explained and stated at the time of survey, particularly when no question was ever raised by the department about the source of investment, then the question of treating the same as an unexplained investment is totally unwarranted. The section invoked in the assessment or considering the same as deemed investment under section 69, is an action having no substance and without any basis or rationale on the part of the Assessing Officer. Even this contention of the Assessee is further strengthened from the fact that the income which was declared by the Assessee during the survey and was accepted by the department as it is, no other source of income was ever confronted by the department at the time of survey, even thereafter. Further declaration of the surrendered income in the return and accepting the statement of the Assessee given at the time of survey, was not found to be incorrect particularly with respect to the source of the said income than there is no reasons to consider the same income as unexplained/uncounted investment in view of the provisions of section 69 of the Act.

7.5 Therefore, in the absence of the any adverse findings by the Assessing Officer on the source of earning of the 175-Chd-2023– Shri Krishan Kumar, Khanna 17 Assessee in respect of the income declared in the return, treating the same as unexplained investment is uncalled for.

The AO was unreasonable and unjustified in rejecting the explanation put forth by the Assessee and the assessment framed is a clearly an example of preset mind of the Assessing Officer. Thus, in the circumstances, the provisions of section 69 of the Act as invoked while framing assessment by the Assessing Officer was unjustified and the action of the Assessing Officer deserves to be negated.

7.6 Reliance can also be placed on the Judgement of the ITAT, Chandigarh Bench in case of ‘Shri Harish Sharma Vs. The Income Tax Officer, Ward 5, Khanna’, Distt. Ludhiana in wherein it was held that:

"Find merit in the contention of the Assessee that in the absence of any adverse findings by the AO on the source of earning of the Assessee, the authorities below have wrongly treated the amount in question as undisclosed income u/s 68 of the Act and computed the Tax liability under the provisions of the section 115BBE of the Act."

7.7 As regards, the charging of income tax @ 60% invoking the provisions of section 115BBE on the income declared by 175-Chd-2023– Shri Krishan Kumar, Khanna 18 the Assessee in its return of income. The Assessee has already made its detailed submissions with respect to the invocation of the provisions of section 69 above. In case the Bench is also of the view that the action of the Assessing Officer in invoking the provisions of section 69 of the Act is not warranted then this ground will consequently become inoperative as the charging of income at a higher rate does not arise when an income is a part of normal business income and the normal rate of tax is applicable.

7.8 It is more of strangulation situation as far as the Assessee is concerned in case he has been charged to tax as

per the provisions of section 115 BBE. Further the provisions of section 69 of the Act apply to unexplained investments and not sum already offered to tax as income by the Assessee in the return of income at the maximum marginal rate. The objective behind the introduction of the section 115BBE was only to curb the practice of laundering of unaccounted money.

7.9 Based on the above, it is requested that the tax on the additional income already declared in Profit and Loss account of the Assessee be kindly treated as business

175-Chd-2023– Shri Krishan Kumar, Khanna 19 income taxed accordingly and not as per the provisions of Section 115BBE of the Act.

7.10 The Assessee, through his additional Ground of appeal has also submitted that the AO had gravely erred in invoking the provisions of section 69 read with section 115BBE on the excess cash of Rs. 1,34,004/- and since the excess cash was related to the same business of purchase and sale of jewellery, hence, the normal rate of tax should be levied on excess cash.

7.11 The contention of the Assessee is that when the income / investment is already surrendered during the survey and also offered for taxes while filing return of income, the same cannot be treated as unexplained investment. Therefore, if an investment is not unexplained than the expenditure claimed in relation to that investment cannot be disallowed.

175-Chd-2023– Shri Krishan Kumar, Khanna 20 income at normal rate applicable for the period under reference and which was accepted by the Revenue authorities at the relevant point in time. It was submitted that the Revenue authorities who had conducted the survey were satisfied about the source of the said transactions which had been carried on by the Assessee under the name and style ofM/s RiwazJeweller, Khanna and no questions or objections were raised during the course of survey proceedings and therefore, the onus cast on the Assessee was duly discharged. It was submitted that the AO has not been able to controvert the aforesaid submissions which were also made during the course of assessment proceedings. It was further submitted that the books of account were maintained in the normal course of the Assessee's business which were duly audited and in the Tax Audit Report, the auditors have also mentioned that there is no change in the nature of the business so carried on by the Assessee as compared to earlier years. It was submitted that the additional income so offered was duly recorded in the books of account and on the basis thereof, was offered to tax by the Assessee while filing his return of income. It was submitted that during the course of assessment proceedings, the submissions were 175-Chd-2023– Shri Krishan Kumar, Khanna 21 filed from time to time which were duly accepted by the A.O., and, wherein it was submitted that none of the income offered for taxation at the conclusion of survey proceedings was in the nature of deemed income and therefore, the deeming provisions as well as provisions of Section 115BBE were not applicable. It was submitted that the AO, however, brought these transactions amounting to Rs.1,00,00,000/- to tax u/s 115BBE of the Act merely for the reason that such income had been offered for taxation during the course of survey proceedings and thereafter, the said findings have since been confirmed by the ld. CIT(A). In view of the above, it was submitted that it is evident from the records that during the course of survey of the business premises, no other source of income except business being carried on in the name and style of M/s RiwazJeweller, Khanna was detected and evidently, the source of additional income offered for taxation was found to be from the said business only as duly corroborated by the statement of the Assessee recorded by the Revenue Authorities at the conclusion of the survey proceedings.

9. It was submitted that the additional income so surrendered was offered for taxation at the rates applicable

175-Chd-2023– Shri Krishan Kumar, Khanna 22 at the relevant point in time and which has also been accepted by the authorities while accepting the surrender letter. It was submitted that the AO has not denied this fact and has rather accepted that the discrepancies found/detected during the survey operations pertain to the business which is being carried on by the Assessee. It was further submitted that Section 115BBE is a machinery provision enabling the AO to levy tax as per the specified tax rate, provided the income is assessable as deemed income under the deeming provisions. It was submitted that, however, in the instant case, the deeming provisions are clearly not attracted as the source of the income has been duly explained by the Assessee during the course of survey proceedings. It was, accordingly, submitted that unless and until the deeming provisions are attracted, Section 115BBE cannot be invoked in the instant case. It was submitted that Section 115BBE is only a machinery provision specifying a special tax rate for bringing deemed income as specified in Section 69, 69A to tax and not for bringing each and every income merely for the reason that the same has been disclosed during the course of survey of the business premises of the Assessee.

175-Chd-2023– Shri Krishan Kumar, Khanna 23 9.1 It was further submitted that the AO has referred to the decision of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. Vs CIT. However, the said case is clearly distinguishable on facts in the present case. It was submitted that the said decision has been considered in various Co-ordinate Chandigarh Bench decisions such as Famina Knit Fabs Vs ACIT 176 ITD 246, Gaurish Steels Pvt. Ltd. Vs ACIT 43 ITR (Trib) 414 and Marshal Machines Pvt. Ltd. (ITA No. 57/CHD/2017). It was submitted that in the said decisions, the Co-ordinate Chandigarh Benches have adequately discussed the judgement of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. as well as Gujarat High Court in case of Fakir Mohmed Haji Hasan Vs CIT.

175-Chd-2023– Shri Krishan Kumar, Khanna 24 (ITA No. 745/Chd/2017) and some other decisionsof the other Benches of the Tribunal.

11. It was, accordingly, submitted that in light of the aforesaid submissions, the amounts so surrendered during the course of survey proceedings is clearly in the nature of business income and it has been duly offered to tax under the head "income from business & profession”. Therefore, the action of the AO in treating the business income so offered by the Assessee as deemed income u/s 69 and 69A and bringing the same to tax under the amended section 115BBE deserve to be set aside and necessary relief be provided to the Assessee.

12. Per contra, the ld. DR has relied on “Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central)’, 126 ITR 49 (Del.) wherein, it has been held that expenditure not accounted for can be estimated and treated as income from undisclosed sources; that correctness of estimate is question of fact and degree; that absence of direct evidence does not preclude assessment by inference and estimate; that it is duty of the ITO to make exhaustive enquires and gather some material as the basis of the estimate; that the estimate

175-Chd-2023– Shri Krishan Kumar, Khanna 25 without details may not be accepted; that where the expenditure on marriage of the Assessee was understated, the ITO estimated the expenditure and treated the same as from undisclosed sources, the joint family had been spending monies for the marriage, it was held that it was more probable that estimated income belongs to HUF and that the Assessee was entitled to the benefit of doubt.

per CBDT guidelines presumably to examine whether the Assessee has honoured the surrender so made at the time of survey while filing his return of income, as also evident from the conduct of the assessment proceedings by the AO in terms of issuing the show-cause and seeking comments of the Assessee on the amount so surrendered during the course of survey and subsequent passing of the assessment order. As per the AO, the amount so surrendered by the

175-Chd-2023– Shri Krishan Kumar, Khanna 26 Assessee during the course of survey though has been offered in the return of income and thus, the Assessee has honoured the surrender of income so made but at the same time, the income so offered in the return of income falls under the deeming provisions of section 69 and 69A of the Act and thus, the tax liability thereon has to be determined in terms of section 115BBE of the Act. As per the ld AR, the Assessee has honoured the surrender so made at the time of survey not just in terms of the quantum of income so surrendered but also in terms of nature of income so surrendered, and the rate of tax at which the surrender has been made and surrender so made has been accepted by the survey team and thus, the deeming provisions of section 69 and 69A r/w section 115BBE are not attracted in the instant case.

14. To appreciate the aforesaid rival positions, we refer to the provisions of Section 69A of the Act. Section 69A provides that 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 175-Chd-2023– Shri Krishan Kumar, Khanna 27 Assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, 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. In the instant case, for the deeming provisions of section 69A to be attracted, there has to be a finding that the Assessee was found to be owner of cash so found at the time survey, such cash has not been recorded in the books of account so maintained by the Assessee, and the Assessee offers no explanation about the nature and source of the cash or the explanation so offered is not found satisfactory in the opinion of the AO.

“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 explanation about the ‘nature and source’ of such undisclosed income. The ld. PCIT in our view, in this case has confused himself between the 175-Chd-2023– Shri Krishan Kumar, Khanna 29 ‘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.

15. The perusal of the above relevant part of the Audit Report proposal of the AO and Show Cause Notice issued by the ld. PCIT u/s 263 of the Act, would show that all the aforesaid authorities have been swayed by the notion that the income surrendered by the Assessee was undisclosed income of the Assessee and therefore, the same has to be assessed u/s 68 to 69D, as the case may be, of the Income Tax Act and thereby would be charged to higher rate of tax u/s 115BBE of the Act. However, as noted above, for an income to be taxed u/s 68 to 69D, as the case may be, it should not only be the undisclosed income but the essential condition is that the Assessee has failed to disclose the ‘nature and source’ of such undisclosed income or that the explanation offered by the Assessee is not found satisfactory by the AO. In the case in hand, as noted above, the AO duly made enquiries from the Assessee as to the nature and the source of the aforesaid surrendered income and has also show caused the Assessee as to why the same should not be charged at a higher rate of tax as per provisions of Section 115BBE of the Act. The ld. AO after considering the submissions and explanations of the Assessee accepted the contention of the Assessee that the surrendered income was out of the business income of the Assessee. The perusal of the impugned order of the ld. PCIT would show that 175-Chd-2023– Shri Krishan Kumar, Khanna 30

the ld. PCIT has not pointed out as to why the explanation offered by the Assessee to the AO was not satisfactory and further what more enquiries are required to be conducted in this case, which the AO had failed to conduct. The ld. PCIT has simply based his opinion and order on the Audit Objections/Report as pointed out even in the Audit Report 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.”

175-Chd-2023– Shri Krishan Kumar, Khanna 31 of sub-section (3) provides that an income tax authority acting under this section shall record the statement of any person which may be useful for or relevant to any proceedings under this Act. Therefore, what explanation has been offered by the Assessee as part of his statement recorded u/s 133A needs to be analysed and examined before drawing any conclusions in this regard.

175-Chd-2023– Shri Krishan Kumar, Khanna 33 income as business income in his return of income and paid due taxes thereon.

20. In case of Gandhi Ram(ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was held by the Chandigarh Bench of the Tribunal, that it is like laying a general rule which 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 and the relevant findings read as under:

175-Chd-2023– Shri Krishan Kumar, Khanna 35 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.”

However the AO observed that the said disclosure was not consistent with the provisions of Section 69B of the Act and same was accordingly brought to tax under section 69B. The Ld. CIT(A) confirmed the order of the AO and thereafter on further appeal, the Coordinate Ahmedabad Bench held that the excess stock found during the survey is not separately and clearly identifiable but is part of mix lot of stock found at the premises which included declared stock as per books

175-Chd-2023– Shri Krishan Kumar, Khanna 36 and also the excess stock as computed by the Survey Officers and therefore the provisions of Section 69B cannot be made applicable as primary condition for invoking the said provision is that the asset should be separately identifiable and it should have independent physical existence of its own and since excess stock as a result of suppression of profit from business over the years and has not kept identifiable separately but as part of overall physical stock found, the investment in the excess stock has to be treated as business income and thereafter has referred to the decision of the Tribunal in case of Fashion Fashion World Vs. ACIT(IT Appeal No. 1634(Ahd.) of 2006, dt. 12/02/2010) wherein the Tribunal had observed 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) ‘profits and gains from business or profession’, (iv) ‘capital gains’ and (v) ‘income from 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 identifiable and hence adjustment was not permitted.

175-Chd-2023– Shri Krishan Kumar, Khanna 37

12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs.25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the Assessee. There was no physical distinction 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 first 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 from business and not any investment as it cannot be co- related with any specific asset.

13. Thus in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent

175-Chd-2023– Shri Krishan Kumar, Khanna 38 existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the Assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is only where no nexus is established with any head then it should be considered as deemed income under section 69, 69A, 69B & 69C as the case may be. It is because when Assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69, 69A, 69B & 69C as the case may be. It should not be done at the first instance without giving opportunity to the Assessee to establish nexus. Therefore, there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss 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, falling under a particular head,

175-Chd-2023– Shri Krishan Kumar, Khanna 39 then the difference should be treated as undeclared business income explaining the investment.

14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head ‘business’. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only.”

22. In the instant case as well, we find that the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income.

175-Chd-2023– Shri Krishan Kumar, Khanna 40

“4.3. We have heard rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the Assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver jewellery. The Coordinate Bench in the case of ChokshiHiralalMaganlal vs. DCIT, 131 TTJ (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it

175-Chd-2023– Shri Krishan Kumar, Khanna 41 further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the Assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon’ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon’ble Coordinate Bench held that where asset in which undeclared independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT (A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found.”

175-Chd-2023– Shri Krishan Kumar, Khanna 42

“2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the Assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the Assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for Assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in Assessee's bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax

175-Chd-2023– Shri Krishan Kumar, Khanna 43 subsequent profit/loss on sale of such stock of rice in future.

2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources". In the present case, the Assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the Assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the Assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the Assessee is allowed.”

25. The said decision of Coordinate Jaipur Benches has since been confirmed by the Hon’ble Rajasthan High Court in case of PCIT vs Bajarang Traders (DB Appeal No. 258/2017 dt. 12/09/2017).

175-Chd-2023– Shri Krishan Kumar, Khanna 44

“10. We have heard the rival contentions and perused the material available on record. This is a fact on record that the Assessee surrendered an amount of Rs.70 lacs as additional income during the course of survey conducted at its premises on account of following heads:

(i) Discrepancy on account of cash Rs. 9 lacs found (ii) Discrepancy on cost of Rs. 21 lacs construction of building (iii) Discrepancy in stock Rs. 10 lacs (iv) Discrepancy in advances and Rs. 30 lacs receivable

13. In the present case, we see that the Assessing Officer has nowhere disputed the business losses incurred by the Assessee. The books have not been rejected. It was stated at the Bar that even at the time of survey, in the trading account prepared by the survey team, there were losses incurred by the Assessee. All these facts have not been disputed by the Assessing Officer. Further, the surrender made by the Assessee was on account of cash found during the course of survey, discrepancy in the cost of construction of building, discrepancy in stock and discrepancy in advances and receivables. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other that the 'business income'.

175-Chd-2023– Shri Krishan Kumar, Khanna 46 under the head deemed income under section 69A of the Act.” 27. Similarly, the Coordinate Chandigarh Bench in case of Famina Knit Fabs Vs. ACIT(Supra) has held as under:

“19. In the facts of the case in the income surrendered was on account of unaccounted receivables of the business of the Assessee amounting to Rs.1.25 crores. The Ld.CIT(A) in para 9 of the order has outlined the facts relating to the surrender made by the Assessee stating that during survey a pocket diary was found from the account section of the Assessee company which contained entry of receivables amounting to Rs.1.25 crores on pages 27, 28, 31 and 33, which were not recorded in the regular books of the Assessee and were subsequently surrendered stating that these entries were unaccounted sundry receivables being surrendered as income under the head business, to buy piece of mind and subjected to no penalty and further that the losses incurred by the Assessee in the impugned year will be adjusted against this surrendered income. The relevant facts as stated by the CIT(A) in para 9 of his order and which are not disputed, are reproduced hereunder: “9. Adverting now to the facts of the instant case, it is seen that when survey proceedings were conducted at the business premises of the appellant company, a pocket diary was found from the accounts section which contained entries of receivables amounting to Rs.1.25 crores on page nos. 27, 28, 31 and 33, which were not recorded in the regular books of accounts. When these entries were confronted to the appellant company while recording the statement on 15/09/2012, it was 175-Chd-2023– Shri Krishan Kumar, Khanna 47 stated: "that these entries are sundry receivables which has not been accounted for in the books of accounts and in order to buy peace of mind, the same is surrendered as income under the head business for F.Y.2012-13 relevant to asstt. Year 2013-14 subject to no penalty and prosecution under the I.T. Act, 1961. Since the company is incurring losses in current F.Y.2012-13, the surrendered income will be adjusted against these losses." [Extracted from the impugned assessment order; pages 5 &6].”

175-Chd-2023– Shri Krishan Kumar, Khanna 48

21. The contention of the Revenue therefore that the income be treated as deemed income u/s 69,69A/B/C of the Act is accordingly rejected and as a consequence thereto the plea that no set off of losses be allowed against the same u/s 115BBE of the Act also is rejected.

28. In the instant case as well, the surrender on account of advances were relating to the business being carried on by the Assessee. The ld CIT(A) has also returned a finding that the advances were admitted as being related to business activity of the Assessee. Where the same has been found unrecorded in the books of account, the same has to be brought to tax under the head “business income”.

175-Chd-2023– Shri Krishan Kumar, Khanna 50

“10.17 Ground Nos. 8 & 9 challenge the action of the lower authorities in applying the provisions of section 115BBE and thereby charging tax at the rate of 60%. The main thrust of the arguments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the Assessee and that nowhere in the assessment order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the Assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the Assessee. The AO has not brought on record any iota of evidence to demonstrate that the Assessee had any other source of income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the Assessee at the rate of 60% in terms of provisions of section 115BBE of the Act. 10.18 The Hon'ble Andhra Pradesh High Court in the case of Principal Commissioner of Income Tax Vs. Deccan Jewellers Ltd. reported in (2021) 438 ITR 131 (AP) held that where the Assessee was engaged in the business of Gold and Diamond

175-Chd-2023– Shri Krishan Kumar, Khanna 51 jewellery and Silver articles and during the search and seizure operation u/s 132, excess stock was found to be declared and the Assessee had submitted that excess stock was result of suppression of profit from business over the years and the same had not been kept identified separately and the AO had duly considered and accepted the Assessee’s explanation that investment in excess stock was to be treated as business income, the revisional powers invoked by the Principal Commissioner u/s 263 of the Act were not correct in the eyes of law. 10.19 The ITAT Chandigarh Bench in the case of Famina Knit Fabs Vs. ACIT reported in (2019) 176 ITD 246 (Chd-Trib) has held that, wherein during the course of survey, a surrender was made by the Assessee on account of debtors / receivables which was based on a diary found during the course of survey and the Revenue had accepted that the surrender was on account of receivables, it followed that the debtors were generated from the sales made by the Assessee during the course of carrying on the business of the Assessee which was not recorded in the books of the Assessee. The Coordinate Bench of the ITAT went on to further hold that though the said income was not recorded in the books of the Assessee but the source of the same stood duly explained by the Assessee as being from the business of the Assessee and even otherwise no other source of income of the Assessee was on record either disclosed by the Assessee or unearthed by the Revenue. The Bench further held that the preponderance of probability, therefore, is that the debtors were sourced from the business of the Assessee. Therefore, there was no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B, or 69C of the Act and the 175-Chd-2023– Shri Krishan Kumar, Khanna 52 same was held to be in the nature of business income of the Assessee. 10.20 Thus, as in the present case, where the source of investment or expenditure is clearly identifiable and the alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment or expenditure, then, first, what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure can it be considered to be taxed u/s 69 of the Act and further where once such investment or expenditure is brought within the purview of tax as undeclared business receipt, then taxing it further as deemed income u/s 69 would be completely out of place. 10.21 Similar view was taken by the Coordinate Bench of ITAT Ahmedabad in the case of ChokshiHiralalMaganlal Vs. DCIT reported in 131 TTJ 1 (Ahd.) 10.22 It is also seen that the Ld. CIT(A) has relied on the judgement of the Hon'ble Punjab & Haryana High Court in the case of Kim Pharma Ltd. Vs. CIT in of 2011 (O&M) and the Ld. CIT DR has also quoted the same in his arguments before us. However, after going through the aforesaid judgement of the Hon'ble Punjab & Haryana High Court, it is seen that in that particular case, the only issue was with regard to the cash surrendered at the time of survey and no other income. The cash found could not be related to the already disclosed and accepted source of income of the Assessee and, therefore, the Hon'ble Punjab & Haryana High Court held that such surrendered cash was to be treated as deemed income u/s 69 of the Act. However, in the present case before us, the Assessee has only

175-Chd-2023– Shri Krishan Kumar, Khanna 53 one source of income i.e. business income and nowhere has it been brought on record that the Assessee had any other source of income except business income and, therefore, we respectfully state that judgement of the Hon’ble Punjab and Haryana High Court in the case of Kim Pharma Pvt. Ltd (supra) would not apply on the facts of the present case. 10.23 Accordingly, keeping in view the various judicial precedents as cited above and respectfully following the same, we hold that the AO could not have legally invoked the provisions of section 115BBE of the Act in the present case and further the Ld. CIT(A) was also not legally correct in upholding of the application of provisions of section 115BBE of the Act. Accordingly, ground Nos. 8 and 9 are also allowed.”

CIT [2013] 35 taxmann.com 456 (P&H). Briefly the facts of the case were that the survey under section 133A was conducted at the business premises of the Assessee and during the course of survey, cash amounting to Rs. 5,00,000/- was found which was surrendered by the Assessee for A.Y 2006-07 and another amount of Rs. 10,00,000/- was surrendered for A.Y. 2005-06 on account of sundry credits, repair to building and advances to staff. The matter pertaining to A.Y 2006-07 came up for consideration before the Coordinate Chandigarh Benches and taking note of the statement of the General Manager of the Assessee

175-Chd-2023– Shri Krishan Kumar, Khanna 54 company recorded during the course of survey wherein he had admitted the said cash has been generated out of income from other sources and in the absence of nature of source of cash being proved, it uphold the order of the CIT(A) in including the additional income as deemed income u/s 69A of the Act and relevant findings read as under:

“9. In the facts of the present case before us, we find that unaccounted cash was found during the course of survey operation in the possession of the Assessee company and the same was surrendered as additional income for the year under appeal. The Assessee has failed to explain the nature and source of the said cash found which was not recorded in the books of account, though while surrendering the additional income it was admitted by the Manager of the Assessee company, in the statement recorded during the course of survey that the said additional income is its income from other sources. The Hon'ble Gujrat High Court in Fakir Mohmed Haj Hussain Vs C IT had 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 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 such Assessee." In the absence of the explanation / evidence regarding the sources of the additional income being

175-Chd-2023– Shri Krishan Kumar, Khanna 55 satisfactorily explained by the Assessee and applying the ratio of the Hon'ble Gujrat High Court in Fakir Mohmed Haji Hasan Vs. C IT (supra), we hold that the additional income offered is deemed income assessable u/s 69A of the Act and no deduction is allowable against such deemed income assessed u/s 69A of the Act in the hands of the Assessee. Following the ratio laid down by the Gujrat High Court in Fakir Mohmed Haji Hasan Vs. CIT (supra), once the Assessee has failed to explain the nature and source of cash found available with it and the same is assessed as deemed income u/s 69A of the Act, therefore, the corresponding deductions under the head Profits and gains are not available to the Assessee. The business loss determined for the year is not allowed to be setoff against such deemed income included in the books of account. The alternative plea of the Assessee of assessing the income under the head income from other sources and allowing set off of losses u/s 71 of the Act also fail in view of the above.

175-Chd-2023– Shri Krishan Kumar, Khanna 56

10. In the facts of the present case, we find that Assessee during the course of survey had surrendered the income as income from other sources though a plea has been raised by the Assessee that the income was surrendered as income from job work but no evidence to prove the stand of the Assessee has been brought on record. The Assessee had also surrendered additional income of Rs. 10 lacs in Assessment Year 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by Assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the Assessee and in the absence of nature of source of cash being proved, the same is not assessable as income from business. In the circumstances, we uphold the order of the CIT(A) in including the additional income as deemed income u/s 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal

raised by the Assessee are dismissed.”

31. Thereafter, the matter came up for consideration before the Hon’ble Punjab & Haryana High Court and the Hon’ble High Court has stated that the AO, the ld. CIT(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the survey was not reflected in the books of account and no source from where it was derived was declared by the Assessee and therefore it was deemed income of the Assessee under section 69A of the Act

175-Chd-2023– Shri Krishan Kumar, Khanna 57 and accordingly the findings of the Tribunal were affirmed and it was held that no substantial question of law arose and the appeal of the Assessee was dismissed. We therefore find that the statement of the General Manager as recorded during the course of survey played a decisive role and was taken into consideration by the Tribunal wherein he had admitted that cash has been generated out of income from other sources and in the absence of nature of source of cash being proved, it uphold the order of the CIT(A) and thereafter, on further appeal, the order of the Tribunal was upheld by the Hon’ble High Court. Unlike the said case, in the instant case, as we have noted above, the Assessee in his statement recorded during the course of survey has clearly stated that he is running a sole proprietorship business concern in name of M/s Riwaz Jeweller, Khanna and is engaged in the business of trading of various kind of jewellery, i.e., gold, silver and diamond and related products and all along, the same is his only source of income and thereafter, he has been confronted with discrepancies in terms of cash found excess as compared to what has been recorded in the books of account, certain advances relating to his business written in a rough diary and excess value of 175-Chd-2023– Shri Krishan Kumar, Khanna 58 stock as compared to what has been recorded in the books of account. Therefore, we find that the Assessee has been confronted with not just the discrepancy so found during the course of survey but the nature and source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from his business operations. Thus, the decision of the Hon’ble High Court, being rendered in the specific facts and circumstances of the said case, doesn’t support the case of the Revenue in the instant case.

175-Chd-2023– Shri Krishan Kumar, Khanna 59

Order pronounced on 4th January,2024