Smt. Kanchan Rathi, Bikaner V. ACIT, Circle-1, Bikaner

ITA 196/JODH/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3420 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-03-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 24-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH MEENA
• Keywords: Unexplained investment; Business income
• Section: 69; 154; 143(3); 133A; 234B; 143(1); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 Smt. Kanchan Rathi, Shri Shyam Sunder Rathi DR Dhanpat Rai Road, Nyashahar, Bikaner [PAN: ARBPR 8316 C] (Appellant) Vs. Commissioner of Income Tax (Appeals)-4, Jaipur /ACIT Circle-01, Bikaner (Respondent) Appellant by Sh. Rajendra Jain, Adv. & Smt. Raksha Birla, CA Respondent by Sh. Prem Prakash Meena, Sr. DR Date of Hearing 11.03.2024 Date of Pronouncement 13.03.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of theCommissioner of Income Tax (Appeals)-4, Jaipur dated 13/03/2023 [here in after ‘CIT(A)’ ] for assessment year 2014-15which in turn arise from the order dated 12.01.2018 passed under section 154of the Income Tax Act, by ACIT, Circle-1, Bikaner. I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 2 2. In this appeal, the assessee has raised following grounds: - “1. The learned CIT(A) Jaipur was wrong in law as well in fact by confirming the order passed by AO u/s 154 of IT Act and calculating the income u/s 115BBE of IT Act. 2. No reasonable opportunity was provided to the assessee while confirming the order passed by AO u/s 154 of the IT Act. 3. Interest charged u/s 234B and 234C was wrongly confirmed by the CIT(A). 4. The assessee reserves the right to add, alter or amend any ground of appeal as and when the need arises u/s 250 of IT Act.” 3. Succinctly, the fact as culled out from the records is that on 15.10.2013 a survey u/s 133A of the Income Tax Act, 1961 was carried out at the assessee's premises. During the survey, certain discrepancies were found in the books of accounts of the assessee in view of which the assessee voluntarily surrendered a sum of Rs. 40,00,000/- as undisclosed income. At the time of filing the return for A.Y. 2014-15 the assessee included this income in its Income Tax Return under the head of 'Business Income.This amount was surrendered by the assessee on account of unexplained and out of books investment in land and its subsequent sale. The assessee has surrendered the income under the head of Business Income as noted above. Consequent to the survey there is no assessment and accordingly there is no adjustment to the returned income. Subsequently a rectification noticeu/s. 154 of the Act was issued to the assessee on 10.03.2017 based on the observation of I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 3 the ld. AO that the assessee has not provided any explanation regarding the investments made by it or income earned from the sale of such undisclosed investment. Therefore, the provision of section 69 of the Income Tax Act, made applicable as the assessee has not provided any explanation regarding the nature and source of investment and expenditure made out ofundisclosed sources. Therefore, this investment is clearly unexplained as per the Section 69 of the Income Tax Act, 1961. The undisclosed income on account of this unexplained investment is required to be considered for taxation as per the provisions of Section 115BBE of the Income Tax Act, 1961.The return for A.Y. 2014-15 was processed u/s 143(1) taxing the surrendered amount of Rs. 40,00,000/- as per normal tax calculation availing the benefit of progressive slab wise taxation. However, as per the facts apparent from record, this amount should have been taxed as per section 115BBE. This omission has resulted into short levy of tax and therefore, the same was rectified as per provision of section 154 (1)(b) of the Act. 4. Aggrieved from the order of AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “6. It is crystal clear from the above chart that the appellant has been given a number of opportunities to present his case. However, no compliance and no I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 4 written submissions are made till date. The appeal has been filed by the appellant but looking at the conduct of not complying with the notices. not filing any information's/submissions in support of the grounds of appeal, the only inference that can be drawn is that the appellant is not interested in perusing the appeal and therefore I am left with no alternative but to decide the appeal on the basis of material available on record. 7. On perusal of the remand report of the appellant and the order passed u/s 154 of the Act. I find that a survey was conducted in the case of the appellant and on noticing of certain discrepancies, the appellant surrendered a sum of Rs. 40,00,000/- as undisclosed income. At the time of filing the return for AY 2014-15 the appellant included this income in its income tax return under the head of Business Income This amount was surrendered by the appellant on account of unexplained and out of books of investment in land and its subsequent sale However, the appellant did not establish any connect regarding how its business income has been utilized to invest in the said land or make any expenditure regarding the same. Therefore, this investment is clearly unexplained as per section 69 of the Act. The undisclosed income on account of this unexplained investment is required to be considered for taxation as per the provisions of section 115BBE of the Act. 7.1 During the course of the appellate proceedings, the appellant has not brought anything on record to show how the income surrendered is a business income. In view of these facts and circumstances of the case, I do not find any infirmity in the order of AO and accordingly the charging of the said surrendered income by invoking the provisions of section 115BBE of the Act is upheld and the Ground of Appeal is dismissed. 8. In the result, the appeal of the appellant is dismissed.” 5. The ld. AR of the assessee vehemently argued that without bringing any finding that the income accepted by the assessee is within the meaning of section 69 of the Act there is no mistake which is apparent of record and therefore, the order passed is bad in law and the ld. AO has not power to change the nature of income already offered in the reurn of income and the same is once accepted as business income I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 5 subsequently the same not being mistake apparenton record the order passed is bad and illegal. 6. Per contra, the ld DR is heard who has relied on the findings of the lower authorities recorded in their respective orders and since the assessee accepted income as additional the same is required to be taxed as per the provision of section 115BBE of the Act. 7. We have heard the rival contentions and perused the material placed on record. The brief fact of the case is that on 15.10.2013 a survey u/s 133A of the Income Tax Act, 1961 was carried out at the assessee's premises. During the survey, certain discrepancies were found in the books of accounts of the assessee in view of which the assessee voluntarily surrendered a sum of Rs. 40,00,000/- as income which has been offered in the return of income filed by the assessee and consequently there is no assessment order passed and intimation u/s. 143(1) was issued. Subsequently the ld. AO issued a notice dated 10.03.2017 proposing to tax the said income u/s. 69 of the Act and thereby proposing to tax the said income u/s. 115BBE of the Act. . At the time of filing the return for A.Y. 2014-15 the assessee included this income in its Income Tax Return under the head of 'Business I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 6 Income.This amount was surrendered by the assessee on account of unexplained and out of books investment in land and its subsequent sale. The assessee has surrendered the income under the head of Business Income as noted above. Consequent to the survey there is no assessment and accordingly there is no adjustment to the returned income. Subsequently a rectification notice u/s. 154 of the Act was issued to the assessee on 10.03.2017 proposing to tax the said income of Rs. 40 lac as undisclosed income and charge the tax as per provision of section 115BBE of the Act. The ld. AO noted that the the assessee has not provided any explanation regarding the investments made by it or income earned from the sale of such undisclosed investment. Therefore, the provision of section 69 of the Income Tax Act, made applicable as the assessee has not provided any explanation regarding the nature and source of investment and expenditure made out of undisclosed sources. Therefore, this investment is clearly unexplained as per the Section 69 of the Income Tax Act, 1961. The undisclosed income on account of this unexplained investment is required to be considered for taxation as per the provisions of Section 115BBE of the Income Tax Act, 1961.The return for A.Y. 2014-15 was processed u/s 143(1) taxing the surrendered amount of Rs. 40,00,000/- as per normal tax calculation availing the benefit of progressive slab wise taxation. I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 7 However, as per the facts apparent from record, this amount should have been taxed as per section 115BBE. This omission has resulted into short levy of tax and therefore, the same was rectified as per provision of section 154 (1)(b) of the Act by the ld. AO vide an order dated 12.01.2018. The ld. CIT(A) confirmed the action of the ld. AO by holding as under : 7. On perusal of the remand report of the appellant and the order passed u/s 154 of the Act. I find that a survey was conducted in the case of the appellant and on noticing of certain discrepancies, the appellant surrendered a sum of Rs. 40,00,000/- as undisclosed income. At the time of filing the return for AY 2014-15 the appellant included this income in its income tax return under the head of Business Income This amount was surrendered by the appellant on account of unexplained and out of books of investment in land and its subsequent sale However, the appellant did not establish any connect regarding how its business income has been utilized to invest in the said land or make any expenditure regarding the same. Therefore, this investment is clearly unexplained as per section 69 of the Act. The undisclosed income on account of this unexplained investment is required to be considered for taxation as per the provisions of section 115BBE of the Act. 8. The bench noted that the assessee has disclosed a sum of Rs. 40,00,000/- as income of the year under consideration by stating as under : “Ůʲ : आप Ȫारा िदया गया उƅ ̇ːीकरण भी पूणŊतः सȆापन योƶ नहीं है और आप Ȫारा fn[kk;k गया सकल लाभ एवं खचő भी सȑािपत नही हो सके है। इसके संबंध मŐ आप Ɛा कहना चाहाते है। उȅर : हमारे Ȫारा िनयिमत बहीखाते रखे जाते हœ िफर भी ʩापार की Ůकृ ित को देखते Šए सभी तȚों का सȑापान कराया जाना संभव नही है। हमारे इस ʩापार के संबंध मŐ सवő कायŊवाही के दौरान ːॉक, रोकड, लूज पेपसŊ खरीद िबकी लेनदार व देनदार खDŽŐ आिद सभी का मेरे Ȫारा सȑापन कराना संभव नही है और अपनी मानिसक शांित एवं िलिटगेशन से बचने के उददेʴ से मœ अपनी चालू िवत वषŊ 2013-14 की यहीखाता के अनुसार िनयिमत आय के अलावा ŝ. 40,00,000 की अितįरƅ आय कर के िलए समिपŊत करती šँ। इस संबंध मŐ सरेǷर नोट अलग से आपकी सेवा मŐ Ůˑुत कर रही šँ तथा इस आय पर बनने वाला अिŤम आयकर ŝ 900000 के चैक भी आपकी सेवा मŐ Ůˑुत कर रही šँ।” I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 8 Thus, it is evident that the assessee has disclosed the discrepancies as income and not any asset or income allegedly undisclosed. Therefore, it is the income on account of error or omission on the part of the assessee during the business and the same view is taken by the jurisdictional high court in the case of in case of CIT vs Bajargan Traders [ITA No. 258/2017 dated 12/09/2017] where in High Court held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head “business income” and not under the head income from other sources. Further in the case of Shri Lovish Singhal vs ITO (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25 May 2018), the Jodhpur Tribunal applying the proposition of law laid down by the Hon’ble Rajasthan High Court in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act and accordingly held that there is no justification for taxing such income U/s 115BBE of the Act. Even the similar view taken by the Jaipur Tribunal in case of ACIT vs Shri Sudesh Kumar Gupta [ITA No 976/JP/2019 AY I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 9 2014-15 dated 9 July 2020] issue under consideration was whether rectification proceedings u/s 154 were permissible when at the first place while passing assessment order u/s 143(3) provisions of section 69 were not invoked for charging higher rate of tax u/s 115BBE, wherein the coordinate bench held that the assessing officer has not invoked the provisions of section 69 at the first place while passing assessment order u/s 143(3) and therefore, the provisions of section 115BBE which are contingent on satisfaction of requirement of section 69 cannot be independently applied by invoking the provisions of section 154 of the Act. Respectfully following the ratio of the aforesaid decision we see no merit in the order passed u/s. 154 of the act and the same is quashed. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 13.03.2024 Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member Ganesh Kumar, PS (On Tour) Copy of the order forwarded to: (1)The Appellant (2) The Respondent I.T.A. No. 196/Jodh/2023 Assessment Year: 2014-15 10 (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order