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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per:Anikesh Banerjee, JM: Both the instant appeals of twodifferent assessee were filed against the order of the ld. Commissioner of Income Tax (Appeals)-5,Ludhiana,[in brevity the ‘CIT (A)’] order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y.2019-20. Both theimpugned orders were emanated from the order of the ld. ACIT/DCIT, Central Circle, Amritsar, [in brevity‘the AO’],order passed u/s 143(3) of the Act.
At the outset, both appeals are under the same factual backdrop and have a common issue. Both the appeals are taken together, heard together and disposed of together. For the sake of convenience is taken as lead case.
3. The assessee has taken the following grounds: “1. That the order passed by the Hon’ble CIT(A) dated 04.01.2023 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 framing the impugned assessment order u/s 143(3) of the Act and without complying &66/Asr/2023 3 Assessment Year:2019-20
mandatory conditions u/s 143/143(2) as envisaged under the Income Tax Act, 1961.
(a) That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in treating the surrendered income u/s 69 of the Act and taxing the same u/s 115BBE of the Act, without considering the facts of the case and without observing the principles of natural justice.
(b) 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 charging income tax as per provisions of section 115BBE i.e. @ 60% plus surcharge @ 25% on the assessed income, without considering the facts of the case and without observing the principles of natural justice.
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.”
4. Brief fact of the case is that the assessee is running the business under the name and style of M/s Lakshmi Glass & Plywood House. A survey was conducted u/s 133 A of the Act. The assessee surrendered the business income amount to &66/Asr/2023 4 Assessment Year:2019-20 Rs.49,89,638/-. The assessee filed the return u/s 139 and declared the surrendered income as business income. The detail of surrendered income is as follows: PARTICULAR AMOUNT Excess Cash found Rs 8,87,780/- Excess Stock found Rs 27,69,958/- Expenditure incurred Rs.13,31,900/- Rs. 49,89,638/- TOTAL During assessment proceeding the ld. AO treated the surrendered income as income from other sources and addition was framed u/s 69 of the Act.
Accordingly, the tax was calculated under the special rate u/s 115BBE of the Act.
The assessee claimed this income as a business income & denied paying the tax u/s 115BBE of the Act. Being aggrieved assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us.
The ld. AR for the assessee filed a written submission and prayed to disposed of the matter on basis of the written submission. As per the submission, the assessee placed that the entire surrendered income is covered business income.
The assessee filed the return u/s 44AD of the Act and has no liability for &66/Asr/2023 5 Assessment Year:2019-20 maintaining the books of account u/s 44AA of the Act. Therefore, the addition u/s 69 A is uncalled for.
The ld. DR vehemently argued and fully relied on the assessment order. The relevant para 3.4 of the assessment order is reproduced as below: “3.4 It is observed that assessee has shown surrender amount of Rs.49,89,638/- under the head “ Income from other sources” as any other income. Thus, evidently, source of investment cash, purchase of stock and investment in construction of house neither claimed nor proved from business. Assessee has also not furnished any documentary evidence to link the investment with the source. Thus, investment in the cash, purchase of stock and investment in construction of house could’t be proved from business. The Hon’ble Punjab & Haryana High Court in the case of M/s Kim Pharma (P) Ltd. has in the case where assessee had shown cash surrender under the head income from other sources has held that cash found during survey, which was not reflected in Books of account, no source was declared by the assessee and in absence of nature of source of cash being proved; the same is not assessable to as income from business. Accordingly, the Hon’ble Punjab & Haryana High Court has uphold the order of the Id. CIT(A) in including the additional income as deemed income u/s 69A of the I.T.Act. &66/Asr/2023 6 Assessment Year:2019-20 This case is identical to the case of M/s Kim Pharma (P) Ltd. where assessee has shown surrender amount of Rs.49,89,638/- under the head “ Income from other sources” as any other income.”
The assessee in the submission placed that the addition was made on basis of the order of Hon’ble High Court of Punjab And Haryanain the case of M/s Kim Pharma P. Ltd vs CIT[2013] 35 taxmann.com 456 (Punjab & Haryana). Held “Where amount surrendered during survey was not reflected in books of account and no source from where it was derived was declared by assessee, it was assessable as deemed income of assessee under section 69A and not business income” The ld. AO fully relied on the order of the Jurisdictional High Court and the addition was confirmed without considering the fact of the case. The assessee submitted a written submission the relevant para is duly inserted for adjudication:
&66/Asr/2023 7 Assessment Year:2019-20 &66/Asr/2023 8 Assessment Year:2019-20 &66/Asr/2023 9 Assessment Year:2019-20 &66/Asr/2023 10 Assessment Year:2019-20 &66/Asr/2023 11 Assessment Year:2019-20
We heard the rival submission and consider the documents available in the record. The assessee declared the income during the survey. The surrendered income was duly declared in the return of income filed u/s 139(1). Considering the nature of surrendered income is excess cash found, excess stock found, expenditure incurred. The revenue was not able to submit any source of income for the assessee other than the business income. The ld. AR relied on the order of the ITAT Ahmedabad in the case of Chokshi Hiralal Maganlal vs. DCIT (ITA No. 3281/Ahd/2009 dated 05.08.2011)The relevant paragraph is inserted as follow:- “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.” &66/Asr/2023 12 Assessment Year:2019-20 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. &66/Asr/2023 13 Assessment Year:2019-20
As noted at the beginning of this order, the facts and issue in both these appeals are common. So, our observations qua in follows accordingly.
In the result, the appeals of the assessee bearing ITA No. 65/Asr/2023 & ITA 66/Asr/2023 are allowed.