AI Insights
The case involves M/s. Bansal Extraction & Export Pvt. Ltd., the appellant, contesting the order of the Deputy Commissioner of Income Tax, Central-1, Bhopal, which was upheld by the Commissioner of Income Tax (Appeals). The dispute centered on the correct computation of the assessed income for the Assessment Year 2011-12 following a search and seizure operation under section 153A of the Income Tax Act. The assessee had declared an undisclosed income of Rs. 2,25,00,000 in response to the search, which was added to the income assessed under section 69B for undisclosed investments in plant and machinery. The primary legal contention was whether the income assessed should be adjusted against the business losses declared by the assessee, which the authorities denied, citing that such deemed income under section 69B is not eligible for set-off against business losses.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 130412 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 3 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-09-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
04-09-2023
Assessment Year
2011-2012
Appeal Filed On
29-05-2022
Judgement Text
Page 1 of 12 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.164/Ind/2022 (Assessment Years:2011-12 ) M/s. Bansal Extraction & Export Pvt. Ltd. 3 rd Floor Tawa Complex, Bittan Market E-4, Arera Colony, Bhopal Vs. DCIT Central-1 Bhopal (Appellant / Assessee) (Revenue) PAN: AADCB 7521 M Assessee by Shri Anil Khabya, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 05.09.2023 Date of Pronouncement 20.09.2023 O R D E R Per Vijay Pal Rao, JM: This appeal by the assessee is directed against the order dated 27.04.2022 of Commissioner of Income Tax(Appeal), arising from giving effect order dated 22.05.2020 passed by the AO in pursuant to the order of Ld. CIT(A) dated 27.02.2020 for A.Y.2011-12. The assesse has raised following grounds of appeal: “1.That the ld. CIT(A) erred in maintaining action of AO in adopting erroneous figure of assessed income as per order u/s 153A r.w.s 143(3) dt. 27-03-2014 at Rs.3,73,47,796/- instead of Rs.1,48,47,800/-. ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 2 of 12 Page 2 of 12 2.That the Ld. CIT(A) erred in holding that depreciation on extra cost of construction added by him as per report of VO(P&M) is not allowable to assessee under the provisions of Act as addition on account of undisclosed investment has been made u/s 69B of the Act.” 2. The Only grievance of the assessee in the present appeal is regarding the assessed income taken by the AO while passing the giving effect order dated 22.05.2020 at Rs.3,73,47,796/- against the assessed income of Rs.1,48,47,800/- taken by the AO in the order passed u/s 153A r.w.s. 143(3) dated 27.03.2014. 3. Ld. AR of the assesse has submitted that while passing assessment order u/s 153A r.w. section 143(3) the AO computed the total income of the assessee at Rs.1,48,47,800/-. He has referred to the computation of total income in the assessment order for A.Y.2011-12 and submitted that once the AO has assessed the total income at Rs.1,48,47,800/- and the addition made by the AO was deleted by the Ld. CIT(A) except a sum of Rs.38,000/- then while passing giving effect impugned order the AO cannot take the income assessed more than the total income assessed in the assessment order. Thus, Ld. AR has submitted that the impugned order of the AO while giving effect to the order of the Ld. CIT(A) is erroneous and not sustainable. He has also referred to the order of the Ld. CIT(A) and submitted that the Ld. CIT(A) while passing impugned order cannot go behind the earlier order of the CIT(A) dated 27.02.2020. Thus, he has pleaded that the impugned order dated 22.05.2020 may be set aside being not sustainable in law. 4. On the other hand, ld. DR has submitted that the assessee itself has surrendered income of Rs.2,25,00,000/- in the return filed u/s 153A of the Act which was enhanced by the AO while passing the impugned order to Rs.3,73,47,796/-. Therefore, the assessed income for the year under consideration is Rs.3,73,47,796/- and not Rs.1,48,47,800/- which is arrived due mistake in calculation of total income. He has further submitted that in any case assessed income cannot be less than the returned income and therefore, the AO has rightly taken the assessed ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 3 of 12 Page 3 of 12 income at Rs.3,73,47,796/-. He has pointed out that there is an apparent mistake in the computation part to the extent of final total income assessed was taken at Rs.1,48,47,796/- due to mistake in calculation and the AO has mistakenly reduced the surrendered income instead of adding the same to the addition made toward unaccounted investment in the plant and machinery. Ld. DR has submitted that the AO has decided this issue in para 10 of the assessment order passed u/s 153A wherein the income surrendered by the assessee on account of undisclosed investment in plant and machinery was found to be Rs.3,73,47,796/- which was not offered to tax by the assessee. Therefore, the total income of the assessee as assessed comes to Rs.3,73,37,796/- + Rs.2,25,00,000/- as addition made by the AO u/s 69B of the Act and the business income of the assesse was declared as loss which was rightly considered by the AO at nil. Ld. DR has submitted that the addition made u/s 69B is not available for setting off business loss and therefore, there is no mistake or illegality in the impugned order of the AO dated 22.05.2020. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. The assessee in the return of income filed in response to notice u/s 153A has declared income of Rs.80,70,896/- after setting off loss of Rs.1,33,04,104/- declared in the return of income originally filed on 27.03.2012. This loss was set off by the assessee against surrendered income of Rs.2,25,00,000/- on account of undisclosed investment in factory building. Thus, it is clear that the AO while passing assessment order u/s 153A denied this claim of setting off losses against the surrendered income which was treated as income u/s 69B and also made an addition of Rs.3,73,47,396/- on account of undisclosed investment in plant and machinery. Consequently the AO assessed the total income at Rs.3,73,47,796/-. The relevant finding of the AO in para 10 to 10.10 is as under: “10. During the course of post search enquiry and assessment proceedings, it was found that the assessee company has made ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 4 of 12 Page 4 of 12 investment in the plant and machinery located at Plot No. 11, Industrial Area, Mandideep, Distt-Raisen. To ascertain the exact quantum of such investment in plant and machinery, reference was made to valuation officer, plant and machinery, New Delhi vide letter dated 02/08/2013 by this office and the valuation report was submitted by him on 04/03/2014 As per the valuation officer reports dated 04/03/2014 there are differences in the value of plant and machinery as valued by valuation officer, plant and machinery, New Delhi and as per the books of account of the assessee company. The year wise difference in investment in plant and machinery as per the valuation officer, plant and machinery New Dellü, report is as under- A.Y. Declared by the Assesse Estimated by valuation cell difference 2006-07 -- -- -- 2007-08 -- -- -- 2008-09 -- -- -- 2009-10 -- -- -- 2010-11 - -- -- 2011-12 14,39,23,204 17,82,71,000 3,73,47,796 2012-13 10,76,77,961 2,56,10,200 (-)8,20,67,761/- Total 25,16,01,165/- 20,38,81,200 10.1 vide show cause notice dated 07/03/2014 assessee was required to furnish detail of difference as per valuation officer report and as per the books of accounts. The assessee was required to reconcile the above difference in his books of accounts. The assessee was also required to show cause as why the difference should not be added as undisclosed investment in the hands of assessee. 10.2 Vide reply dated 14/03/2014 the assessee has stated that:- "Kindly refer to our letter dt. 15-01-2014 whereby we have submitted the figures of investment made in cost of plant and machinery for each year which is summarized for ready reference: ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 5 of 12 Page 5 of 12 Balance as on balance sheet dates Cost of plant & machinersy Cost of machinery each year Revaluation reserve Net Actual cost of plant and machinery As on 31.03.2011 Machinery put to use Rs.14,39,23,204/- Machinery under installation Rs.3,00,96,505/- Lab Equipment Rs.4,02,949/- 17,44,22,658 - 17,44,22,658 As on 31.03.12 25,35,59,846/- 7,91,37,188/- 5,00,00,000 20,35,59,846 The year wise reconciliation of book figures of investment and figure of valuation reported by DVO is prepared as under- Assessment Year 2011-12 Assessed value 17,82,71,000/- Less: Value of P&M installed and used 14,39,23,204 Value of lab equipment 4,02 949/- Value of machinery installed but not put to use 3,00,96,505 Difference in valuation. 38,48,342/- Assessment year 2012-13 Assessed Value 2.56,10,200 Less: Declared value 10,76,77.9611- Less: Revaluation Reserve 5,00,00,000/- Less: Machinary purchased In 2011-12 bur installed 3,00,96 505/- 27581456 during the year Difference in valuation (-)19,71,256/- The overall reconciliation of book figures of investment and assessed valuation is summarized as under: Total assessed value of plant and machinery Rs. 20,38 81,200/- Less: Total declared value Rs 25,16,01, 165/- Less: Revaluation reserve Rs. 5,00,00,000- Rx 20,16,01,165/- Difference in book investment und assessed value Rs 22,80,035/- The overall difference in actual book investment and assessed valuation is merely 1% of total investment .No addition is therefore called for." 10.3 The reply of the assessee has been considered and examined and found to be not acceptable an the basis of following reasons:- As per the report of valuation officer, Plant and machinery, New Delhi, the assessee company has made total investment of Rs. ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 6 of 12 Page 6 of 12 17,82,71,000/- in AY. 2011-12 in plant and machinery located at Plot No. 11. Industrial Area, Mandideep, Distt-Raisen. However, as per the books of accounts of assessee has shown investment is 14,39,23,204/-, therefore, the assessee company has made investment in plant and machinery of Rs. 3,73,47,796/- outside the books of account in A. Y. 2011-12. ii.During the course of assessment proceedings the assessee has not submitted any material evidence of above difference in investment in plant and machinery. Therefore, the assessee has made total investment of Rs. 3,73,47,796 outside the books of account in AY 2011- 12. iii. During the course of assessment proceedings the assessee has not submitted any material evidence, which substantiate his clann The reference to DVO, Bhopal made by this office is accordance with the Law. Section 131(d) of the IT Act, 1961 empower the assessing officer to issuing commission to Valuation Officer to inspect the property and submit actual cost of investment. Plain reading of section 131(1)(d) is as under-" 131(1) The Assessing Officer Deputy Commissioner (Appeals), Joint Commissioner. Commissioner (Appeals), Chief Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144C shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely (a) discovery and inspection (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath, (c) compelling the production of books of account and other documents, and (d) issuing commissions. 10.4 In view of the above it is established and held that the assessee has made investment of Rs. 3,73,47,796/- in the plant and machinery in A.Y. 2011-12. The above investment not recorded in the books of account of assessee company. The provision of section 69B states that wherein the financial year immediately preceding the assessment year the assessee has made investment which are not recorded in books of accounts, if any maintained by him for any source of income, and the assessee offers no explanation about the nature and source of investment or the explanation offered by him is not in the opinion of the AO satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 10.5 Thus the reading of the said section clearly stipulates that the ons lies on the assessee to explain the nature and source of investment to the satisfaction of the assessing officer. Thus, the assessee has to establish the true nature of the investment and the known source of income to make investment with corroborative ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 7 of 12 Page 7 of 12 evidence. Reliance is also placed on the decision of the MP High Court in the case of Commissioner of Income-tax v. Omprakash Bagria (HUF) (287 ITR 523) wherein is upheld the reference made to the valuation officer in respect of construction of building us 142A and accordingly unexplained investment so determined was confirmed u/s 69B of the Act. 10.6 The Kerala High Court in the case of Shakti Tourist Homes vs. CIT-4303 ITR 228), observed that during a search the department noticed creation of an asset in the form of a building constructed by the assessee. The investment was accounted by the assessee at some value whereas the department got it valued by DVO at value much higher than declared by the assessee. The Hon'ble Court held that the unexplained investment was deemed income of the year which investment was made as provided us 65B of the Act. The claim for spreading over the investment for several years could be granted it was proved that the investment was made in several years: 10.7 Similarly in the case of CIT vs VA Oli Maiconmad (296 ITR 570) the Madra High Count, placing reliance on the judgment of the Supreme Court in the case of CIFP MOhanakala (291 ITR 278) affirmed the order of the ITAT in confirming the addition made on account of difference in the value of cost of construction of building determined by DVO vis-a-dis declared in the books of accounts over the period of construction as unexplained u/s 6913 of the Act 10.8 The Calcutta High Court in the case of el Construction Company Ltd Vr JCIE (260 ITR 187), was of the view that any evidence in the form of bills and vouchers towards construction of building found during search and not reflected in the books of accounts are liable to be added as unexplained investment u/s 69B of the Act. 10.9 In the case of Smt. Amar Kumar Surana vs CIT (226 ITR 344), the Rajasthan High Court had observed that the AO after obtaining the valuation report of the plot of land, had issued notice to the assessee to show cause as to why the value the plot of land in question should not be taken as per the valuation report and on the basis of comparable cases. The assessee had not given any reason as to why the property had been sold to the assessee for roughly half the prevalent market rate. In the absence of that the only inference that could be drawn was that the assessee had, in fact, concealed the actual consideration paid to the seller. The addition made by the AO was therefore held to be justified under section 69B of the Act. 10.10 Thus, after considering the evidences placed on record and valuation report submitted by the valuation officer, plant and machinery, New Delhi, and the non-submission of satisfactory explanation on the source of such investments, I am to hold that the investment in plant and machinery, which is not recorded in the books of account of assessee is treated as undisclosed investment ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 8 of 12 Page 8 of 12 and deemed income from undisclosed sources u/s 69B of the Act. Therefore, the amount of Rs. 3,73,47,796/- is hereby added to the income of assessee as undisclosed investment u/s 69B of the Act for A.Y. 2011-12 Penalty proceedings u/s 271AAA for AY 2011-12 is hereby initiated.” 5.1. Thus, the AO has assessed the undisclosed investment u/s 69B at Rs.3,73,47,796/- towards undisclosed investment in plant and machinery apart from surrendered income of Rs.2,25,00,000/- but mistakenly the amount of surrendered income is reduced from the addition made by the AO which is apparent from the calculation as under: 5.2 Thus, the amount of Rs.1,48,47,800/- was mistakenly treated as total income of the assessee. The fact remains that in the return of income assessee itself the asessee has declared undisclosed income of Rs.2,25,00,000/- and after setting of losses of Rs.1,33,04,104/- assessee declared his net income of Rs.80,70,896/-. The assessee challenged the said assessment order before the Ld. CIT(A) wherein the Ld. CIT(A) deleted the addition to the extent of Rs.3,34,99,454/- which is apparently more than the mistaken amount of Rs.1,48,47,800/-. In any case the relief in pursuant to the order of the Ld. CIT(A) would be only to the extent of ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 9 of 12 Page 9 of 12 addition made by the AO and would not reduce the return income of the assesse. While giving effect to the order of the Ld. CIT(A) dated 27.02.2020 the AO has passed order dated 22.05.2020 as under: ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 10 of 12 Page 10 of 12 5.3 This order was challenged by the assessee before the Ld. CIT(A) only on the ground that the AO has wrongly taken assessed income at Rs.3,73,47,796/- as against Rs.1,48,47,800/-. The Ld. CIT(A) has considered this issue in para 4.1.2 as under: “4.1.2. I have gone through the assessment record and the submission of the appellant and found that original return of income was filed by the appellant on 27.03.2012 at loss of Rs. 1,33,04,104/- . This return was offered in pursuance to section 153A of the Act. Subsequently, this return was revised on 27.01.2014 and total income was shown at Rs. 80,70,896/-. In the revised return the appellant offered income from undisclosed source of Rs. 2,25,00,000/- which has been shown under the head" Income from other source" in the computation of income filed along-with return of income. On going through the assessment order, it has been found that the Ld AO has made addition of Rs. 3,73,47,796/- u/s 69B of the Act on account of undisclosed investment in Plant & Machinery. But, on perusal of computation of income, as given in para-12 of the assessment order dated 27.03.2014, it has been found that the Ld AO has reduced the above addition by an amount of Rs. 2,25,00,000/- being surrendered income. I find that in the assessment order dated 27.03.2014, the Ld AO has not discussed about the giving credit of surrendered income of Rs. 2,25,00,000/-. Thus, the Ld AO committed an error which is not found correct as per the assessment order. It has been also found that the Ld AO has taken returned income at Nil and made addition u/s 69B of the Act. The Ld AO rightly taken return income as Nil as against loss of Rs. 1,33,04,104/- as addition made u/s 69B of the Act is deemed income against which no set off of losses, expenditure, deduction etc are allowable. I find that the stand taken by the Ld AO was as per the decision of Hon'ble, Gujarat High Court in the case of Fakir Mohmed Haji Hasan Vs CIT [2001] 247 ITR 290 (Gujarat) has held that scheme of sections 69, 69A and 69C shows that where nature and source of investments or source of acquisition of money, bullion, etc., owned by assessee are not explained satisfactorily and same are not recorded in books of account or expenditure incurred is unexplained, then same may be deemed to be income of such assessee and it would not be possible to classify such deemed income under any of heads mentioned in section 14 and therefore, the corresponding deductions which are applicable to the incomes under any of the various heads u/s 14 of the Act, will not be attracted in the case of deemed incomes which are covered under the provisions of Sections 69, 69A, 69B and 69C of the Act. Relevant para of the said decision is reproduced here under: "8. The opening words of Section 14 "save as otherwise provided by this Act" clearly leave scope for "deemed income" of the nature ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 11 of 12 Page 11 of 12 covered under the scheme of Sections 69, 694, 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, 694, 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 the case of deemed incomes which are covered under the provisions of Sections 69, 694, 69B and 69C of the Act in view of the scheme of those provisions." Therefore, the Ld AO with intention to tax whole amount u/s 69B of the Act has taken Nil return income ignoring the loss of Rs. 1,33,04,104/- as shown in the original return of income by the appellant. This stand of the Ld AO has not been agitated before the first appellate authority by the appellant. I find that the surrendered income of Rs. 2,25,00,000/- was not shown in the original return of income. Therefore, while giving effect to the appellate order dated 27.02.2020, the Ld AO has removed the error committed by the AO in the assessment order dated 27.03.2014 and correctly taken assessed income at Rs. 3,73,47,796/-. Thus, I find no infirmity in the order u/s 250 of the Act dated 22.05.2020. Accordingly. the ground of appeal is dismissed.” 5.4. As we have discussed the correct facts emerging from the original assessment order that the AO has assessed the total income at Rs.3,73,47,796/- and instead of adding the surrendered income of Rs.2,25,00,000/- has substracted the amount from the addition made which has resulted the net to tax income at Rs.1,48,47,800/-. However, the facts remains that the AO made an addition of Rs.3,73,47,946/- to the surrendered income of Rs.2.25 crore. Therefore, the AO in the given effect order has assessed the total income of Rs.38,48,342/- which is inconsonance with the addition sustained by the CIT(A) while passing the order dated 27.02.2020. Hence, the mistake in computation part of the assessment order is no more a subject matter in dispute when the assessment order itself merges with the order of the Ld. CIT(A) dated ITA No.164/Ind/2022 Bansal Extraction & Export Pvt. Ltd. Page 12 of 12 Page 12 of 12 27.02.2020. Though on the legal aspect the income surrendered on account of undisclosed investment would not be available for setting off the business losses however this issue is not involved in the present proceedings. Accordingly we do not find any reason to interfere with the impugned order of Ld. CIT(A), same is upheld. 6. In the result, the appeal of assessee is dismissed. Order pronounced in the open court on 20 .09.2023 Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 20 .09.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Other Referred Cases
Fakir Mohmed Haji Hasan Vs CIT [2001] 247 ITR 290 (Gujarat), Commissioner of Income-tax v. Omprakash Bagria (HUF) (287 ITR 523), Shakti Tourist Homes vs. CIT-4303 ITR 228, CIT vs VA Oli Maiconmad (296 ITR 570), el Construction Company Ltd Vr JCIE (260 ITR 187), Smt. Amar Kumar Surana vs CIT (226 ITR 344), CIT vs. Omprakash Bagria (HUF) (287 ITR 523)
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