Appeal Details
Counselvise Citation
[2023] 101 COUNSELVISE.COM (IT) 9874 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 8 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-11-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
29-10-2023
Assessment Year
2017-2018
Appeal Filed On
28-03-2022
Judgement Text
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी बीबी बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी #व$म &संह यादव, लेखा सद+य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 319/Chd/2022 Assessment Year : 2017-18 Shri Ravinder Kumar Bansal C/o Bansal Hospital & Heart Centre, Haripura Road, Sangrur-148001 The Pr. CIT Patiala ./PAN NO: ACMPB9825C Appellant Respondent ! " Assessee by : Shri Sudhir Sehgal, Advocate # ! " Revenue by : Smt. Kusum, CIT, DR $ % ! & Date of Hearing : 30.10. 2023 '()* ! & Date of Pronouncement : 29.11.2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. Pr. CIT, Patiala dt. 15/03/2022 pertaining to Assessment Year 2017-18. 2. In the present appeal, the assessee has raised the following grounds of appeal: 1. That the Ld. PCIT, Patiala has erred in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 and, thereby, holding that the assessment as framed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and further erred in setting aside the order dated 06.06.2019 as passed by the Assessing Officer. 2. That the Ld. PCIT has further erred in holding that on the amount of Rs. 90,00,000/-, as offered during survey, provisions of section 115BBE are applicable and failed to appreciate that during survey, documentary evidences had been found and impounded, which established that the said income, as offered, was from the professional Income of the assessee. 2 3. That the Pr. CIT has failed to appreciate the fact that the assessment had been framed after due application of mind and thorough investigation and all the issues / impounded material has been analyzed, enquired into, and dealt with by the concerned Assessing Officer, before passing the order u/s 143(3). 4. That the replies as filed during the course of proceedings before the Assessing Officer and Ld. PCIT have not considered properly. 5. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.” 3. During the course of hearing, the ld AR submitted that the assessee is an individual carrying on the profession of Medical Practitioner and doing his practice for last many years. Other than the said profession, the assessee does not have any other source of income. The books of accounts of the assessee are duly audited by a Chartered Accountant and copy of audit report in Form 3CB-CD is forming part of paper book at Pg 5-27. 4. It was submitted that a survey u/s 133A of the Act was conducted by the Income Tax Authority on 30.08.2016 at the business premises of the assessee, where, to cover the discrepancies of profession, the assessee had surrendered an amount of Rs. 90,00,000/- on account of unexplained misc. advances and the surrender was made just to buy peace of mind and to avoid litigations and tax was also paid on the same at normal rates of tax. It was submitted that the said surrender of Rs. 90,00,000/- was made on account of Misc. Advances which were given out of suppressed professional receipts of the assessee. Moreover, there is no other source of income to the assessee except medical professional receipts and the advances were given out of professional receipts and therefore, tax on the same was paid at normal tax rates applicable to the assessee. 5. It was submitted that the assessee thereafter had filed his return of income for the relevant year on 19.08.2017 at an income of Rs.1,31,20,570/- which 3 includes income of Rs. 90,00,000/- as surrendered during the survey proceedings. Then the case of the case was selected for compulsory scrutiny under CASS and various notices u/s 142(1) of the Act were issued to the Assessee. During the course of assessment proceedings, a detailed questionnaire dated 31.12.2018 was issued to the assessee asking various queries on different aspects in the case of assessee including the details of capital account of the assessee and GP/NP ratios. It was submitted that a detailed reply in response to the said questionnaire was filed by the assessee addressing all the queries raised by the Ld. AO along with the ledger copy of capital account giving narration of debit and credit entries of the capital account and a chart depicting GP/NP ratios. 6. It was submitted that thereafter, during of the course of assessment proceedings, the AO vide point no. 1 of the questionnaire dated 20.05.2019 asked the assessee to furnish details of Rs. 90,00,000/- as found written on the letter head of the assessee and which was impounded during the survey operations and he was once again asked to file the comparison of major expenses & GP in pre and post survey period. In response to the said notice, the assessee filed a reply wherein it was submitted before the AO that the sum of Rs. 90,00,000/- depicts the advances given out of the suppressed professional receipts of the assessee and it has been surrendered as additional professional receipts during the course of survey proceedings. Further, the assessee also filed GP ratio including as well as excluding the surrender amount. In the said reply, the attention of the Ld. AO was drawn to the fact that the Gross Profit (in absolute as well as in percentage terms) as calculated by the Chartered Accountant depicts that the sum surrendered during the survey operations has been duly taken into the books of accounts of the profession i.e. the surrendered sum is forming part and parcel of the professional receipts of the assessee. 4 7. It was submitted that even in the surrender letter filed by the assessee before the department at the time of survey operations, the surrender of Rs. 90,00,000/- as made by the assessee is over and above the regular professional receipts of the assessee and it is also mentioned in the surrender letter that tax shall be paid on such additional income as advance at normal tax rates. The copies of cheques of estimated amount of tax calculated at normal rates were also given to the department which were duly accepted by department and it depicts that surrender was made as a part of regular professional receipts of the assessee with the consent of the department at that time. It was submitted that after considering the reply filed by the assessee, the AO took a conscious decision based on the due application of mind and based on the in-depth verifications made by the AO, assessment order was passed u/s 143(3) of the Act wherein returned income of the assessee was accepted and surrendered income was accepted as part of business income. 8. It was submitted that thereafter, a proposal dated 21.10.2019 was sent by the DCIT-Circle Sangrur to the PCIT-Patiala to consider the case of the assessee for revision proceedings u/s 263 of the Act on the issue that the assessee ought to have disclosed the unexplained income u/s 115BBE of the Act which would have resulted in an effective tax rate of 77.25% and consequent to that, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. Based on the said proposal and without independent application of mind by the PCIT, a show cause notice (SCN) dated 05.11.2019 was issued to the assessee u/s 263 of the Act to show cause as to why the order passed by the AO should not be considered as erroneous as well as prejudicial to the interest of the revenue and why the tax rates as mentioned in section 115BBE of the Act should not be applicable to the income surrendered by the assessee. 5 9. In response to the said notice, the assessee filed a detailed reply containing facts of the case as well as judicial pronouncements supporting the case of the assessee. Thereafter, another SCN dated 23.02.2022 was issued to the assessee wherein it was asked from the assessee to explain how the aforesaid amount has been offered as professional income. It was also enquired that the capital account of the assessee has been credited with Rs. 1,30,91,976/- as a net profit transferred to capital account but the corresponding entry as per disclosure letter is not apparent. In this respect, it was submitted that the issue raised by the ld PCIT in this question has already been addressed by the assessee in assessment proceedings vide reply dated 16.01.2019 and reply dated 28.05.2019 wherein it is clear that the detailed copy of capital account was filed by the assessee wherein each and every debit or credit entry was explained to the AO. Further, the surrendered sum is forming part of the income credited in the Income and Expenditure account was also proved vide filing of GP ratios with or without the surrendered sum. It depicts that the issues which are now enquired by the ld PCIT have already been well enquired by the Ld. AO at the time of assessment proceedings and thereafter, he has taken one of the possible views regarding applicability of section 115BBE of the Act. It was submitted that the ld PCIT however passed the impugned order dated 15.03.2022 u/s 263 of the Act wherein case of the assessee was set aside to the file of the AO on the issue of chargeability of tax @ 60% on income surrendered by the assessee. Against the order passed by the Ld. PCIT, the assessee is now in appeal before the Tribunal. 10. In the aforesaid factual matrix of the case, the ld AR submitted that the assessee had surrendered a sum of Rs. 90,00,000/- on account of Misc. advances given out of the suppressed receipts of the profession. Referring to the statement of Sh. Sandeep Singh proprietor of a diagnostic lab running at the business premises of the assessee, it was submitted that in response to question 6 no. 4, 9 & 10, it has been admitted by him that he is giving 70% of the lab receipts to the assessee on daily basis. Such commission income has not been shown by the assessee in his books of account and out of such suppressed income, misc. advances to the tune of Rs. 90,00,000/- have been given by the assessee. Since the said receipts are related to the profession carried on by the assessee, therefore, whatever has been surrendered by him is related to the medical profession carried on by the assessee. 11. Further, Ld. AR drew our attention to the seized material in the shape of Lab Register for the period 31.05.2016 to 29.06.2016 (Annexure-6) and 30.06.2016 to 18.07.2016 (Annexure -2) and copy of OPD Register from 31.05.2016 to 29.07.2016 and it was submitted that a perusal of these registers depicts as under: All the OPD Receipts, as per the OPD register, were duly accounted for in the books of accounts. The assessee has also received commission @ 70% of total receipts from the Lab which have not been accounted for in the books of accounts and these are suppressed professional receipts of the assessee. Other than that, there are few patients, whose names are appearing in the Lab registers but who have also taken OPD consultancy from the assessee, however, their names have not been entered in the OPD Register, which again is an element of suppressed professional receipts of the assessee. 12. It was submitted that all these receipts, though suppressed, are forming part of the professional receipts of the assessee and therefore liable to be taxed at normal tax rates applicable to the assessee. Even at the time of surrendering the said sum of Rs. 90,00,000/-, it was specifically mentioned by the assessee that the surrender has been made as additional income which is over and above the regular business of the assessee. Moreover, the surrender has been made just to buy peace of mind and to avoid litigations and commitment to pay on the said surrender amount at normal tax rates was also made by the assessee at 7 that time and the department never contended the said commitment of the assessee. It depicts that at the time of surrender also, the tax authorities have accepted the surrendered sum as a part of regular business income of the assessee. Therefore, tax paid on the additional business income of the assessee at normal tax rates is totally justified based on the facts of the case. 13. It was further submitted that during the course of assessment proceedings, the issue of taxability of income surrendered by the assessee was well enquired by the AO which is evident from the fact that the details which have already been verified by the AO during the assessment proceedings are now been asked by the worthy PCIT in show-cause dated 23.02.2022. It depicts that there was proper application of mind by the AO and he took a possible view on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of business income of the assessee. It was accordingly submitted that it is definitely not a case of lack of enquiry by the AO and in fact there is proper application of mind by the AO. 14. It was further submitted that the revision proceedings u/s 263 of the Act have been initiated merely on the basis of difference of opinion which cannot be taken as a ground to determine the order passed by the AO as erroneous and prejudicial to the revenue. Reliance in this regard is placed on the following judgments including the judgment of jurisdiction bench of ITAT wherein it has been held that the action of the ld PCIT u/s 263 of the Act is bad in law where the AO, after due application of mind during the course of assessment proceeding, took a possible view which is different from the PCIT and has accepted the additional income surrendered as a business income of the assessee: • DEV RAJ HI TECH MACHINES LTD. vs. DCIT 83 Taxmann.com 15 (ASR Trib) 8 • SANJAY JAIN & SONS vs. PCIT in ITA NO 141/CHD/2021 • CIT vs. A.R. BUILDERS & DEVELOPERS P. LTD. (Madras High Court) (2020) 425 ITR 272 (Mad) • KUSUMLATA SONTHALIA vs. PCIT (ITAT Kolkata) (2020) 82 ITR (Trib)382 • PCIT vs. DECCAN JEWELLERS P LTD. 132 Taxmann.com 73(AP) • M/S VENUS TEXSPIN LTD. vs. PCIT in ITA No. 793/Chd/2017 • PRAMOD KESHARICHAND SHAH vs. PCIT in ITA no. 43/SRT/2018 15. It was submitted that based on the above judgments, merely because the AO has not put up the issue in detail in the assessment order does not mean that the issue has not been verified in detail by him. In the case of assessee, specific queries were raised on the issue under consideration and detailed replies were filed by the assessee which were duly considered by the AO and decision has been taken by him on the basis of the facts of the case which clearly identifies that that the surrender pertains to the business income of the assessee and therefore, the same has been taxed at normal rates of tax. 16. It was further submitted that the ld PCIT has held the order passed by the Ld. AO as erroneous as well prejudicial by applying the explanation 2 to section 263 which is totally incorrect as the case of the assessee does not fall in any of the limb of explanation 2 to section 263. The AO has made in depth enquiries on the issues concerned and there is no lack of enquiry as specific enquiry was asked by the AO on the concerned issue and in depth reply was also filed on the same. Therefore, even after the thorough application of mind by the AO, merely because it seems to the ld PCIT that issue had remain unattended by the AO, he cannot invoke section 263 of the Act by treating the order passed by the AO as erroneous and prejudicial to the interest of the revenue. 9 17. It was further submitted that the application of mind of the AO is also evident from the Para 2 of the assessment order wherein it has been mentioned as under: “In response to the notice, Sh. Naresh Jindal CA attended the assessment proceedings from time to time. The counsel of the assessee filed power of attorney along with books of accounts and relevant documents/vouchers, which were examined on test check basis and placed on record.” 18. It was submitted that the above depicts that each and every thing stands examined by the AO and there is no new issue which is pointed out by the PCIT and therefore, the revision proceedings u/s 263 are bad in law and deserves to be quashed and reliance has been placed on the following judgments: • NARAIN SINGLA vs. PCIT in ITA no. 427/CHD/2015 • CIT vs. ANIL KUMAR SHARMA as reported in 335 ITR 83 (Del HC) • CIT vs. HINDUSTAN MARKETING AND ADVERTISING COR. LTD. 341 ITR 180 (Del HC) • CIT vs. LATE SH. VIJAY KUMAR KOGANTI as reported in 195 DTR 428 (Madras HC) • SHRI VARINDER KUMAR GUPTA vs. ITO in ITA No. 754/Chd/2018 order dated 06.05.2020 (Chd Bench) • DHARAMPAL CONTRACTOR HOT MIX PLANT vs. PCIT in ITA No. 211/Asr/2017 order dated 14.06.2019 (Amritsar Bench) • SURINDRA ENTERPRISES vs. ITO (Chandigarh Bench) as reported in 18 ITR 325 (2012) 19. It was further submitted that the nature and source of the income surrendered during the course of survey has been duly explained and the case of the assessee is covered by the decision of the Coordinate Chandigarh 10 Benches in case of M/s Surya Hatchery Vs. Pr. CIT (in ITA No. 317/Chd/2022 dt. 07/12/2022), in case of Neelkanth Hatcheries Vs. Pr. CIT (in ITA No. 318/Chd/2022 dt. 07/12/2022), in case of Gandhi Ram Vs. Pr. CIT (in ITA No. 121/Chd/2021 dt. 04/08/2022), and decision of Coordinate Delhi Benches in case of Shri Balwinder Singh Vs. PCIT (in ITA No. 570/Del/2022.). 20. Per contra, the Ld. CIT/DR has relied on the findings of the Ld. PCIT. It was submitted that during the course of survey, the assessee had surrendered an amount of Rs. 90,00,000/- which is in the nature of undisclosed advances which were not accounted for in the books of accounts. It was submitted that assessee in his return of income has shown the surrendered income as business income and has paid taxes as per normal slab rate. It was submitted that during the course of assessment proceedings, the assessee failed to submit any explanation for showing the surrendered income as normal business income. It was submitted that the amount so surrendered represent the undisclosed income of the assessee which would have never come to light had there been no survey action under section 133A of the Act and the same could not be treated as normal business income and have to be considered as unexplained income under section 69, 69A and 69B of the Act and the tax rate @ 77.25% should have been applied as per the provisions of Section 115BBE of the Act in terms of amendment to Section 115BBE by taxation laws 2 nd Amendment Act, 2016. It was accordingly submitted that in this case, the AO should have considered the amount so surrendered as unexplained income under section 69, 69B or 69D and the tax should have been charged under section 115BBE of the Act. 21. It was further submitted that this was the only possible view in the facts and circumstances of the present case wherein the provision of Section 115BBE are applicable on surrendered income after taking cognizance of prevalent 11 provisions of law and therefore the contention of the ld AR that the AO has taken a possible view cannot be accepted. It was accordingly submitted that there is no infirmity in the order of the Ld. Pr. CIT wherein the order so passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue. 22. Further reference was drawn to the decision of Hon’ble Gujarat High Court in case of Fakir Mohamad Haji Hasan Vs. CIT 247 ITR 290, decisions of Hon’ble Punjab & Haryana High Court in case of Pr. CIT Vs. Khusi Ram & Sons Foods(P) Ltd. in ITA NO. 126 of 2015 (O&M) dt. 21/07/2016, in case of Kim Pharma Pvt. Ltd. Vs. CIT 216 Taxman 153 (P&H) ITA No. 106 of 2011(O&M), and decision of Hon’ble Kerala High Court in case of Maruthi Babu Rao Jadav Vs. ACIT in WA No. 984 of 2019 dt. 23/09/2020. 23. In his rejoinder, the Ld. AR submitted that all these decisions which have been relied on by the Ld. PCIT have been duly considered by the various Coordinate Chandigarh Benches decision which have been relied on by the assessee. It was further submitted that same has been again considered in the recent decisions of Coordinate Chandigarh Bench in case of M/s Sham Jewellers in ITA No. 375/Chd/2022, in the case of M/s Sham Fashions in ITA No. 315/Chd/2022 and in case of Shri Parmod Singla, Prop. M/s Singla Wire & Allied Products vs ACIT in ITA No.516/CHD/2022 dated 24/07/2023. 24. We have heard the rival contentions and purused the material available on record. Recently, we have decided a similar matter in case of Shri Parmod Singla, Prop. M/s Singla Wire & Allied Products vs ACIT (Supra) wherein we have discussed the matter in detail including the various authorities quoted at the Bar and it would be relevant to refer to the discussion therein which are equally relevant in the instant case and the same is reproduced as under: 12 “13. We have heard the rival contentions and purused the material available on record. The genesis of the present case lies in the survey operations u/s 133A conducted at the business premises of the assessee on 8/07/2016 wherein the assessee surrendered a sum of Rs 84.80 lacs, thereafter the return of income filed by the assessee on 23/03/2018 was selected for compulsory manual scrutiny as 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 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 69 and 69A of the Act. Section 69 provides that where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 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 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 69 to be attracted, there has to be a finding that the assessee has made investments during the financial year in the stock and by way of advances, such investments are not recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO. Similarly, 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 accounts so maintained by the assessee, and the assessee offers no explanation 13 about the nature and source of the cash or the explanation so offered is not found satisfactory in the opinion of the AO. 16. Recently, in case of Surender Kumar & others (ITA No. 398/Chd/2022), the Coordinate Chandigarh Benches has held that there is difference between the undisclosed income and unexplained income and the deeming provisions are attracted in respect of undisclosed income however, the condition before invoking the same is that the assessee has either failed to disclose the nature and source of such income or the AO doesn’t get satisfied with the explanation so offered by him and the relevant findings read as under: “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 ‘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 14 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 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.” 17. Therefore, the foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee and thus, the deeming provisions are automatically attracted. Rather the foundational requirement is whether the assessee has made the investment/has been found to be owner of cash and the explanation offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the relevant case. In fact, if we look at the provisions of section 133A, clause (iii) 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. 18. In the instant case, in the statement so recorded of the assessee during the course of survey, in Question No. 3 raised by the survey team, the assessee was asked about the source of his income and in response, the assessee submitted that he was sole Proprietor of M/s Singla Wire and Allied Products, Patiala and except the said business, he has no other source of income. Further, he stated that he was not partner/Director in any of the firm or company. In Question No. 4 raised by the survey team, he was asked to state the date of commencement of his concern and the nature of activity carried out alongwith details of manufactured products. In response, the assessee submitted that the concern started business in the year 2008 and it is involved in manufacturing of aluminum and copper wires and thereafter, he has given the details of manufacturing process. In Question No. 10, he was asked by the survey team that as per assessee’s books of account, there was cash in hand of Rs. 66,400/- however on physical verification, Rs. 10,46,000/- is found from your business premises thus there is excess cash of Rs. 9,80,000/- and the assessee was asked to 15 explain the discrepancy. In response, the assessee submitted that at this point in time, he was not in a position to explain the said discrepancy found in cash and offered the difference of Rs. 9,80,000/- for taxation. In Question No. 11, the survey team noted that one note pad (katcha) was found during the course of survey and advance to various persons to the tune of Rs. 55,00,000/- has been found noted therein and the assessee was asked to explain the nature of these advances. In response, the assessee submitted that these advances relates to his business activity, however he is not in a position to explain the same at this moment of time and to buy peace of mind, he offered this amount of Rs. 55,00,000/- for taxation for the F.Y. 2016-17 pertaining to A.Y 2017-18. In Question No. 12, the survey team stated that stock to the tune of Rs. 17,38,400/- has been found as per the books of account maintained by the assessee, however on physical verification, stock to the tune of Rs. 37,38,210/- has been determined and the assessee was asked to explain the difference of excess stock valued at Rs. 20,00,000/-. In response, the assessee submitted that at this moment of time, he is not in a position to explain the said difference of Rs. 20,00,000/- however to buy peace of mind, he offered this amount of Rs. 20,00,000/- for taxation for the F.Y. 2016-17 pertaining to A.Y. 2017-18. Thereafter, in the statement so recorded, it is mentioned that taxes on total additional income of Rs. 84,80,000/- so surrendered by the assessee were worked out and three post dated cheques were given by the assessee to the survey team for securing the payment of due taxes amounting to Rs. 26,20,000/-. Thereafter, in terms of surrender letter dt. 08- 09/07/2016 addressed to the Additional CIT, Patiala Range, Patiala, the assessee has reiterated the amount surrendered of Rs. 84,80,000/- which were offered as additional income at the time of survey on account of certain discrepancies noticed in terms of advances to various persons amounting to Rs. 55,00,000/-, cash in hand of Rs. 9,80,000/-, excess stock of Rs. 20,00,000/- and the tax liability of Rs. 26,20,000/- which has been worked out at the time of survey and the details and particulars of the cheque issued were mentioned. 19. We therefore find that through various questions raised during the course of survey, the assessee has been asked about the nature and source of his income and various discrepancies so found during the course of survey. In response, the assessee has stated that he is running a sole proprietorship business concern in name of M/s Singla wires and allied products since 2008 wherein he manufactures and sells aluminum and copper wires 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 accounts, certain advances relating to his business written in a rough diary and excess value of stock as compared to what has been recorded in the books of accounts. 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. There is a clear statement of the assessee that the advances are related to his business, however since the same have not been recorded in the books of accounts, he has offered the same to taxation. Similarly, the stock physically found has been valued and then, compared with stock as recorded in the books of accounts, thus, there is clear nexus of stock with the assessee’s business. The statement of the assessee is available on record and related documents so found during the course of survey are stated to be in possession of 16 the Revenue authorities. Apparently, the AO has failed to take into consideration the statement of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Following the surrender so made during the course of survey, the assessee has honored the surrender so made and offered the additional income as business income in his return of income and paid due taxes thereon. 20. In our view, what is relevant before invoking the deeming provisions is not just the factum of survey action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey proceedings and which has not been recorded in the books of accounts and the same is the essence of the statutory provisions as duly recognized by the Courts and various Benches of the Tribunal and which has been reiterated from time to time. The statement of the assessee has to be read as a whole and not in piecemeal especially where the Revenue is relying on the same statement and in such circumstances, the defence available to the assessee in terms of part of the statement not been considered by the Revenue cannot be ignored. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn’t mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he has to call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions. 21. In case of Gandhi Ram (ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was held 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: 5. “Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which to our mind 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. The ld PCIT has to record his 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 17 cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law.” 22. In case of Chokshi Hiralal Maganlal Vs. DCIT (Supra), briefly the facts of the case were that during the course of survey under section 133A which was carried out at the premises of the assessee, excess stock of gold and silver ornaments were found and in the return of income subsequently filed by the assessee, he had included the value of excess stock as part of closing stock inventory. 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 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. 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 18 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 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, 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.” 15. In view of the above, AO is directed to consider the sum of Rs.8,10,011/- as undisclosed business income assessable under the head ‘business’ and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO. 19 23. 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. 24. Following the said decision of the Coordinate Ahmedabad Bench, the Jaipur Bench in case of DCIT Vs. Shri Ram Narayan Birla (Supra) has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. The relevant findings are contained at para 4.3 which read as under: “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 Chokshi Hiralal Maganlal 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 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.” 25. Thereafter, the Coordinate Jaipur Benches in case of Bajargan Traders Vs. ACIT (Supra) has similarly held as under: 20 “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 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.” 26. The said decision of Coordinate Jaipur Benches has since been confirmed by the Hon’ble Rajasthan High Court in case of PCIT vs Bajargan Traders (DB Appeal No. 258/2017 dt. 12/09/2017). 27. Similarly, the Coordinate Chandigarh Benches in case of M/s Gaurish Steels Pvt. Ltd. Vs. ACIT (Supra) has held as under: “10. We have heard the rival contentions and perused the material available on record. This is a fact on record that the assessee surrendered 21 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 found Rs. 9 lacs (ii) Discrepancy on cost of construction of building Rs. 21 lacs (iii) Discrepancy in stock Rs. 10 lacs (iv) Discrepancy in advances and receivable Rs. 30 lacs 11. These facts have not been disputed by any one at any stage. The only issue to be considered by us is whether the income of Rs.70 lacs surrendered is to be taxable as business income or income from other sources or as deemed income under sections 69A, 69B and 69C of the Act as held by the Assessing Officer. A number of judicial pronouncements have been cited during the course of hearing, however, we have to bow down to the proposition laid down by the Jurisdictional Punjab & Haryana High Court in the case of M/s Kim Pharma Pvt. Ltd.(supra) since this is the only judgment of the Jurisdictional High Court which were brought to our notice. 12. On perusal of the said judgment, we find ourselves in agreement with the submission of the learned counsel for the assessee, that the only issue in that case was the taxability of cash surrendered during the course of survey, as the assessee had also surrendered 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 the assessee was already included as income from business. 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'. 14. Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Further, even the survey team has not found any source of income except the business income. Now, following the 22 judgment of Jurisdictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash all other income surrendered may be brought to tax under the head 'business income' while the cash has to be taxed under the head deemed income under section 69A of the Act.” 28. 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 ITA No.408/Chd/2018, 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 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].” 20. Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows 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. 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. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue. The preponderance of probability therefore is 23 that the debtors were sourced from the business of the assessee. Therefore, there is no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B and 69C of the Act and the same is held to be in the nature of Business Income of the assessee. Having held so, the same was assessable under the head ‘business and profession’ and as stated above, the benefit of set off of losses both current and brought forward was allowable to the assessee in accordance with law. 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. 22. Therefore, as per the facts of the case in ITA No.408/Chd/2018 and as per the provisions of law relating to the issue, the surrendered income, we hold, was assessable as business income of the assessee and set off of losses was to be allowed against the same as rightly claimed by the assessee. The appeal of the Revenue, therefore, in ITA No.408/Chd/2018 is dismissed. 23. Now coming to the facts of the case in ITA No/1494/Chd/2017, the income surrendered was on account of the following as narrated above in earlier part of our order: (i) investment of Rs. 60 lacs in Kothi at Sukhmani Enclave in the name of Smt. Rekha Miglani; (ii) Sundry creditors and advances received from customers amounting to Rs. 132 lacs; (iii) Gross profit on sale out of books amounting to Rs. 198 lacs and; (iv) surrender to cover miscellaneous discrepancies in loose papers etc. amounting to Rs. 10 lacs. 24. As far as the surrender made on account of investment in Kothi of Rs.60 lacs, neither is the same disclosed in the books of the assessee nor source of the same disclosed. Therefore, the same is to be assessed as deemed income u/s 69 of the Act. The same applies to the surrender of Rs.10 lacs made to cover the miscellaneous discrepancies in loose paper of Rs.10 lacs. Neither the nature of the discrepancies, nor any source relating to the same has been disclosed and, therefore, the same is also to be assessed as deemed income u/ss 69, 69A, 69B and 69C of the Act. 25. As far as the surrender of Rs.132 lacs made on account of sundry creditors and advances received from customers and Rs.198 lacs on account of gross profit on sale out of the books, both of them clearly are in relation to the business carried on by the assessee and are thus in the nature of business income. Therefore, the set off of business losses, both 24 current and brought forward are to be allowed as per the provisions of law. As far as the income surrendered and to be assessed u/s 69, 69A, 69B and 69C of the Act, as held above before us, the same is to be subjected to tax as per the provisions of section 115BBE of the Act.” 29. 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 accounts, the same has to be brought to tax under the head “business income”. 30. Similarly, the Coordinate Chandigarh Bench in case of M/s Sham Jewellers Vs. The DCIT (Supra) has held as under: “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 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 25 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 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 Chokshi Hiralal Maganlal 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 ITA No. 106 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 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 26 in upholding of the application of provisions of section 115BBE of the Act. Accordingly, ground Nos. 8 and 9 are also allowed.” 31. Now, coming to the decision of Kim Pharma (P) Ltd. Vs. 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 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 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 27 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. 9. The learned AR for the assessee had placed reliance in CIT & Another Vs. S.K.Srigiri & Bros. (supra) for the proposition that even in cases of survey, the additional income surrendered is includible as income from business. In the facts of that case, we find that the Tribunal after considering the records and statement given by the partners of the assessee firm, on facts, came to the conclusion that assessee had received additional income from business onl y and not from other sources. The said conclusion of the Tribunal was upheld by the Hon'ble Karnataka High Court in CIT & another vs. S.K.Srigiri & Bros. (supra) and the remuneration paid to the partners was held allowable against the additional income form business. The said precedent has been taken note of by the Hon'ble Gujrat High Court. 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.” 32. 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 accounts 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 and accordingly the findings of the Tribunal were affirmed and it was held that no substantial question of law arises 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. 28 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 Singla Wires and Allied products since 2008 wherein he manufactures and sells aluminum and copper wires 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 accounts, certain advances relating to his business written in a rough diary and excess value of stock as compared to what has been recorded in the books of accounts. 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. 33. In light of aforesaid discussion and in the entirety of facts and circumstances of the case and following the decisions supra, the income of Rs 84,80,000/- surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 and 69A of the Act and the same has been rightly offered to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration.” 25. As we have held above, the foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee, rather the requirement is whether the assessee has made any undisclosed advances and what is the explanation offered by the assessee explaining the nature and source of such undisclosed transaction and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the present case. Once the deeming provisions are held applicable, the provisions of section 115BBE specifying the specified rate of tax as against normal rate of tax can be held applicable and not otherwise. The same is consistent stand across various of the Benches as we have discussed in aforesaid matter. 26. In the instant case, in the show cause issued under section 263 of the Act, the Ld. Pr. CIT has stated that during the course of survey proceedings at the assessee’s business premises, certain discrepancy were observed and 29 confronted to the assessee and in response, the assessee offered a sum of Rs. 90,00,000/- towards unexplained misc. advances. It was further stated by the Ld. Pr. CIT that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income. In the said background, the assessee was also asked to justify as to why the tax have not been paid as per the provisions of Section 115BBE of the Act. Basis the above, it was stated by the Ld. Pr. CIT that the assessment seems to be erroneous so far as prejudicial to the interest of the Revenue. 27. We therefore find that the show cause U/S 263 has been issued for the reason that there was a survey operation at the business premises of the assessee and assessee has offered a sum of Rs. 90,00,000/- during the course of survey and since the assessee has paid taxes thereon at normal rate of tax and has not paid taxes as per the provisions of Section 115BBE of the Act, the Ld. Pr. CIT deemed it appropriate to invoke his jurisdiction under section 263 of the Act. In our view, the very basis of invocation of jurisdiction under section 263 suffers from serious fallacies in the sense that the unexplained income found and surrendered during the course of survey proceedings have been sought to be brought to tax straightway under section 115BBE of the Act. And if we look at the provisions of Section 115BBE of the Act, it provides that where the total income of the assessee includes any income refer to in section 68, 69, 69A, 69B, 69C and 69D which is either reflected in the return of income furnished by the assessee or determined by the AO, the income tax payable shall be at the rate specified therein. Therefore, for section 115BBE, which talks about specified rate of tax, to be applicable in the instant case, the deeming provision of Section 68 to 69D needs to be satisfied at first instance and only in those cases where the deeming provisions are applicable, the tax rate as specified in Section 115BBE of the Act can be applied. Further if we look at the deeming provisions, which 30 apparently does not found mention in the show cause notice issued by the Ld. Pr. CIT, it provides that where the assessee has made any investment or advances which are not recorded in the books of accounts and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the AO, the value of investment may be deemed to be the income of the assessee for such financial year. We therefore find that there is a difference in terms of the undisclosed income and the unexplained income and the deeming provisions are attracted in respect of the undisclosed income which may be found during the course of survey but before the same is assessed and brought to tax under the deeming provision, what is relevant to examine is the sufficiency and adequacy of the explanation so submitted by the assessee explaining the nature and source of such income. There is thus a difference between the undisclosed income and the unexplained income which apparently is absent on the face of the show cause notice. As we have held in case of Shri Parmod Singla (supra), the mere fact that the survey proceedings have been initiated at the business premises of the assessee doesn’t by default mandate the AO or for that matter, the ld PCIT to invoke the deeming provision and before invoking the deeming provision, he has to call for the explanation and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provision. 28. Moving further, let’s look at the findings of the Ld. Pr. CIT as to how he has held that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue. The Ld. Pr. CIT has stated that survey under section 133A of the Act was conducted at the business premises of the assessee on 30/08/2016 and certain discrepancy were found, confronted and accepted by the assessee during the course of survey proceedings in terms of unexplained misc. advances of Rs 90,00,000/- and the case of the assessee is squarely covered under the deeming provision as advances are covered u/s 69, 69B or 31 69D and thereafter the discrepancy found during the survey proceedings attracted the provision of Section 115BBE of the Act. As we have noted above, there is no findings recorded by the Ld. Pr. CIT as to whether any explanation was called for from the assessee in terms of these undisclosed transactions either during the course of survey proceedings or during the course of assessment proceedings and how the explanation so offered was not found acceptable to the Ld. Pr. CIT. 29. As we have held in case of Gandhi Ram Vs. Pr. CIT(supra), the Ld. Pr. CIT has to record specific findings as to the applicability of the relevant deeming provision and how the explanation called for and filed by the assessee is not acceptable in the facts of the present case and which is clearly absent in the instant case. There is no inquiry or investigation which has been conducted by the Ld. Pr. CIT and there is no positive evidence brought on record as to why the deeming provision read with section 115BBE of the Act are applicable in the instant case. Therefore in absence of clear cut findings recorded by the Ld. Pr. CIT as to how the order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, the findings of the Ld. Pr. CIT deserves to be set aside. 30. Having said that, let’s look at the nature and source of income surrendered and the explanation submitted by the assessee during the course of survey and whether the matter has been inquired into by the AO during the course of assessment proceedings or not. 31. At the outset, it is noted that as per records, there is no statement of the assessee which has been recorded at the time of survey. There is however a statement of Shri Sandeep Singh which was recorded during the course of survey who was the proprietor of the diagnostic lab which was running at the business premises of M/s Bansal Hospital & Heart Centre. In the statement of Shri 32 Sandeep Singh, in response to Question No. 2 where he was asked about his source of income, he has stated that he was running a diagnostic centre at the business premises of the assessee. Thereafter, in response to question no. 4, he stated that whatever he earns from the Diagnostic centre, he gives total receipts to Dr Ravinder Bansal on daily basis. Thereafter, in response to question no. 5, he says that he doesn’t’s pay any rent to Dr Ravinder Bansal but give him commission @ 70%. In response to question no 8, he says that he maintains a note book where he maintain record of total receipts and then, in response to question no. 9, he says that he earns Rs 1500 to 2000/ per day after giving 70% to Dr Ravinder Bansal. It is also a matter of record that the lab register for the period 31/05/2016 to 29/06/2016 as well as OPD register from 31/05/2016 to 29/07/2016 as well as a sheet of paper containing name of few persons and certain amounts against their name has been impounded during the course of survey. The assessee thereafter in the surrender letter dt. 05/09/2016 has stated that some discrepancies have been pointed in some heads in the account books during the course of survey and to cover up the discrepancies, he offers additional income of Rs 90 lacs over and above his normal to buy piece of mind and to avoid litigation. 32. Thereafter the assessee filed his return of income disclosing the amount so surrender in the P&L Account and the same was offered to tax under the head business income at the normal rate of tax. During the course of assessment proceedings, the AO in the notice issued under section 142(1) dt. 20/05/2019 has asked the assessee to explain the document impounded during the course of survey wherein details of Rs 90 lacs have been mentioned and details about the business income amounting to Rs. 90,00,000/- shown in the P&L Account. In response to the notice so issued, the assessee has filed his submission stating that these transactions relates to advances given out of professional receipts which were not accounted for in account books. It was stated by the assessee that 33 this income was duly shown in income tax return and in account books in professional receipts and taxes have been duly deposited thereon. 33. We therefore find that the assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that nature of such advances is unaccounted business advances and the source of such income so surrendered is assessee’s share of diagnostic lab fees received from Shri Sandeep Singh who was running the diagnostic lab from business premises of the assessee and sharing 70% of lab fees with the assessee which remain unaccounted and undisclosed at the time of survey. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee’s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69-69B of the Act. The AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the Shri Sandeep Singh, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. 34. In light of the above, we are of the considered view that the order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are 34 attracted, the same can be a basis for exercise of jurisdiction under section 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 29.11.2023. Sd/- Sd/- आकाश द प जैन #व$म &संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद+य/ ACCOUNTANT MEMBER AG Date: ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar
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