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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income Tax (Appeal), Ludhiana-5 (in brevity ‘the CIT (A)’) order passed u/s 250 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2018-19. The impugned order was emanated from the order of the ld. DCIT Central Circle-1 Jalandhar, (in brevity the ld. AO) order passed u/s 143(3) of the Act.
The assessee has taken the following revised grounds:
“1. That the order passed by the Hon’ble CIT(A)-5 dated 01.05.2023 is against the law and facts of the case.
2. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of surrendered income to the extent of Rs.33,00,000/- as unexplained income without considering the fact that entire surrender income was made out of business income and the same was stated during the course of statement recorded during survey.
3. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition u/s 69/69A of the Act and charging tax as per section 115BBE of the Act, without considering the facts of the case.
4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
Brief facts as culled out from the records are that the survey was conducted at the premises of assessee on dated 21.11.2017. The assessee had surrendered the total amount of Rs.76 lacs in following manners:
Particulars Amount Excess Cash found Rs.8,00,000/- Excess Stock found Rs.43,00,000/- Expenditure incurred on Rs.25,00,000/- renovation of business premises
Total Rs.76,00,000/- The assessee is a manufacturer and trader of CI Valves and Trailer Partsunder the name and style of M/s S.S. Industries. The ld. AR claimed that the assessee’s source of income from past many years only to business, during survey the books of accounts and the bills are impounded. The assessee surrendered the income, declared in the return of income filed u/s 139(1) of the Act. The assessment proceeding was framed u/s 143(3). The ld. AO has charged Rs.33 lacs u/s 69 and applied provision of section 115BBE of the Act. The ld. AO claimed that the assessee was unable to substantiate the source of cash Rs.8 lacs and the expenditure incurred on renovation of business premises Rs.25 lacs which were not originated from the business income. Being aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the assessment order. Being dissatisfied the assessee filed an appeal before us.
The ld. AR filed a brief synopsis which is kept in the record. The ld. AO only press the ground nos. 2 and 3 related to his revised grounds. The ld.AR argued that the assessee had surrendered the income out of difference in cash balance during survey and different in stock during survey and expenditure incurred on renovation of business premises. The assessee has no other source of income, so all the undisclosed incomes were originated from the business.
The ld. AR placed the copy of the statement recorded by the ld. AO u/s 131(1) r.w.s.133A which is reproduced as below:
4.1 The ld. AR relied on the judicial pronouncements which are reproduced as below:
“5. That reliance is placed on decision of the Hon’ble Ahmedabad Tribunal in case of Chokshi Hiralal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 dated 5 August 2011) in which it was held that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure. In case source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim that it cannot be separated from business then first ‘what is to be taxed is the undisclosed business receipt. Only on failure of such exercise, it would be regarded as taxable under section 69 on the premises that such excess investment or asset or expenditure is unexplained and unidentified, satisfying the mandate of the law.
• Lakhmichand Baijnath v/s CIT, 35 ITR 416(SC), Supreme Court Of India, in which it was held as under:
The position may thus be summed up : In the business accounts of the appellant we find certain sums credited. The explanation given by the appellant as to how the amounts came to be received is rejected by all the IT authorities as untenable. The credits are accordingly treated as business receipts which are chargeable to tax. In Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807 (SC) , this Court observed:
"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year, the ITO is entitled to draw the inference that the receipts are of an assessable nature."
Sir, the case of assessee is covered by decision of Hon’ble Jurisdictional Bench in & 66/ASR/2023 in the case of Sh. Rakesh Kumar v/s DCIT, ITAT Amritsar, dated 14.06.2023 in which it was held as under:
“8.1 We respectfully consider the order of the Hon’ble Jurisdictional High Court in the case of Kim Pharma P. Ltd. (supra). The observation of the Hon ’ble High Court is related to the surrendered income which is unidentifiable, the amount surrendered during survey would not reflected in the books of account and the source from where it was derived was not declared.The same was assessable as deemed income u/s 69A of the Act. We respectfully observed the order of the Hon’ble High Court. It is not under the factual matrix in assessess’s case. The assessee declared the income and filed the return u/s 44AD of the Act under the presumptive scheme. The assessee declared the surrendered income in the return and all the surrendered income are nature of business transactions. We fully relied on the order of the ITAT, AhemdabadChokshi Hiralal Maganlal (supra) and order of Hon ’ble Apex Court in the case of M Ganpati Mudaliar (supra).Accordingly, the addition made u/s 69A amount to Rs. 49,89,638/- is liable to be deleted and the calculation of tax u/s 115BBE is liable to be quashed. The income of the assessee will be treated as business income.”
5. The ld. DR vehemently argued and relied on the order of the revenue authorities. The ld. DR invited our attention in assessment order page 2 para 4 & 5 of assessment order which are reproduced as below:
“4. The submission made by the assessee is not found acceptable. The assessee was asked to explain the source of additional disclosure of Rs.25,00,000/- made under head Building. But the assessee during the whole assessment proceedings failed to produce any documentary evidence to substantiate its claim that investment made under head building under construction is out of its business income. The assessee was given sufficient opportunity during survey and assessment proceedings to explain the source of this investment, but he failed to do discharge his onus. Further, it is pertinent mentioned here that the additional disclosure in head of building of Rs.25,00,000/- was done only after the survey was conducted. If survey proceeding were not conducted at the business premises of the assessee, the assessee would have never been made this addition in the building head on his own. Further, the assessee has stated that the surrender amount does not come under the preview of section 115BBE of the Act as the source of investment made is out of business income of the assessee. In response to reply of the assessee, it is pertinent to mention here that the assessee has not produced any documentary proof which can prove that the investment made under head building under construction is out of its business income.
The assessee was also asked to explain the source of cash amounting to Rs.8,00,000/-surrendered during the course of survey proceedings and also to explain why the same may not be treated as unexplained money u/s 69A of the Act and taxed as per provision of section 115BBE of the Act. In response thereto, the assessee submitted that surrendered cash found from the cashier is the cash in the normal course of normal business from the only the business premises of the assessee and was compared with the cash book maintained for his business. Therefore, the surrendered does not come under preview of section 69A r.w.s. 115BBE of the Act. The above said submission of the assessee is not acceptable. The excess cash found at the business premises of the assesseeduring the course of survey proceedings was neither recorded in the books of accounts of the assessee nor was the assessee able to explain the source with any documentary evidence. Even after affording multiple opportunities to the assessee, the source of the excess cash could not be ascertained. The assessee could not substantiate that it was generated out of his regular business activity. Also, the assessee has relied on various judgments of Hon'ble ITAT and Hon’ble High Courts, but the facts of the assessee are different and the assessee in the instant case has failed to discharge his onus as per the provisions of section 68/69 of the Act.”
We heard the rival submission and considered the documents available in the record. From the statement recorded during the survey u/s 131(1) r.w.s.
133A the assessee surrendered the income and specifically mentioned that the income originated from the source of business income. In the statement recorded, the revenue has not made any confrontation against the assessee’s submission. The revenue was not able to found any other source of income that the assessee can invest in undisclosed income during the survey or in assessment proceeding. Only mentioning the account head of undisclosed income is not served the purpose. The revenue has to prove that the source of undisclosed income is not from business income. The assessee was running business from long run. The books of account are impounded with bills and vouchers. The difference of cash Rs.8 lac was found in difference of stated in cash book and the impounded cash in physically found in the business premises. Further the assessee made the investment from undisclosed source of income in renovation of the business premises which is fully related to the business income.
6.1 We respectfully relied on the order of Hon’ble Rajasthan High Court in the case of CIT vs. Bajargan Traders D.B. I.T. No. 258/2017 order dated 12.09.2017; and in ITAT Ahmedabad Tribunal in the case of Chokshi Hiralal Maganlal(supra) and finally respectfully we relied on the order of Hon’ble Apex Court in the case of Lakhmichand Baijnath(supra). The view of ITAT Ahmedabad benchalready has been taken in the & 66/Asr/2023 order dated 14.06.2023 (supra)in favour of the assessee. In our considered view the surrendered income Rs.33 lacs will not under the purview of section 69 of the Act. Accordingly, the application of section 115BBE is uncalled for. We dismissed the appeal order passed by the ld. CIT(A). In the result, the ground nos. 2 and 3 of assessee’s appeal are allowed.
Ground nos. 1 and 4 are general in nature.
In the result, the appeal of the assessee bearing is allowed.
Order pronounced in the open court on 21.08.2023