Shri Harish Sharma, Ludhiana V. ITO , Ludhiana

ITA 327/CHANDI/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4769 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-02-2021
• Assessment Year: 2017-2018
• Appeal Filed On: 22-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAGANPREET SIDHU
• Keywords: Unexplained cash credit; Business income; Set aside
• Section: 69C; 143(3); 133A; 153A; 68; 69; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A, CHANDIGARH BEFORE: SHRI N.K. SAINI, VICE PRESIDENT AND SHRI R.L. NEGI, JUDICIAL MEMBER ./ ITA NO.327/CHD/2020 / ASSESSMENT YEAR : 2017-18 SHRI HARISH SHARMA S/O SH.BRIJ MOHAN C/O AMBICA MEDICOS, G.T. ROAD, KHANNA, DISTT. LUDHIANA. THE INCOME TAX OFFICER, WARD-5, KHANNA, DISTT. LUDHIANA. ./PAN NO: AURPS1352C /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI ASHWANI KUMAR, CA ! / REVENUE BY : MS.LAGANPREET SIDHU, ADDL. CIT ' # $ /DATE OF HEARING: 18.02.2021 %&'( $ /DATE OF PRONOUNCEMENT: 11.05. 2021 (HEARING THROUGH VIDEO CONFERENCING) / ORDER PER R.L. NEGI, JUDICIAL MEMBER : THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS )[IN SHORT THE LD.CIT(A)] , LUDHIANA DATED 25.08.2020,PASSED U/S 250(6)) OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS ACT, FOR THE ASSESSME NT YEAR 2017-18, WHEREBY THE LD. CIT(A) HAS DISMISSED THE A PPEAL ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 2 OF 9 FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S 133A WAS CARRIED OUT ON 14.09.2016 AT THE BUSINESS PREMI SES OF THE ASSESSEE AND M/S AMBIKA MEDICOS. DURING THE COU RSE OF SURVEY PROCEEDINGS, A NOTEBOOK PERTAINING TO M/S SH ARMA OVERSEAS SERVICES WAS FOUND, IN WHICH ENTRIES WERE RECORDED REGARDING CASH COLLECTION OF RS.10 LACS DURING THE PERIOD FROM APRIL, 2016 TO AUGUST 2016. THE ASSESSEE CONT ENDED THAT HE WAS THE PROPRIETOR OF M/S SHARMA OVERSEAS S ERVICES, WHICH CARRIED OUT ITS BUSINESS FROM 01.04.2016 TO 31.08.2016. THE ASSESSEE FURTHER ADMITTED THAT THE SAID NOTEBOOK CONTAINS ENTRIES RELATING TO HIS BUSINESS CONCERN AND DECLARED THE ADDITIONAL INCOME OF RS.10 LACS DU RING THE SURVEY ACTION. THE ASSESSEE FILED HIS RETURN OF INC OME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 22.03.20 18, DECLARING TOTAL INCOME OF RS.10,55,640/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE AO PASSED ASSESSMENT ORDER U/S 143(3) AND ACCEPTED THE RETURN. HOWEVER, THE AO TREATED THE DECLARED AMOUNT OF RS.10 LACS AS UNDISCLOSED IN COME OF THE ASSESSEE U/S 68 OF THE ACT AND COMPUTED THE TAX LIABILITY UNDER THE PROVISIONS OF SECTION 115BBE OF THE ACT. ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 3 OF 9 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEF ORE THE CIT(A). THE LD.CIT(A) AFTER HEARING THE ASSESSE E DISMISSED THE APPEAL AND UPHELD THE ACTION OF THE A O. AGAINST THE SAID FINDINGS OF THE LD.CIT(A) THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL. 4. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. COUNSEL ON THE FOLLOWING GROUND: THAT THE ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS AGAINST LAW AND FACTS ON T HE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRAR ILY UPHOLD THE ACTION OF THE LEARNED ASSESSING OFFICER IN TREATING THE SUM OF RS.10,00,000/- AS INCOME TO BE TAXED U/S 115BBE OF THE INCOME TAX ACT, 1961 WHEREAS IT WAS IN FACT BUSINESS INCOME OF THE APPELLANT. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE IMPUGNED ORDER PASSED BY THE LD.CIT(A) SUF FERS FROM LEGAL INFIRMITY AS THE AO HAD WRONGLY TREATED THE AMOUNT OF RS.10 LACS DECLARED BY THE ASSESSEE DURIN G THE SURVEY PROCEEDINGS AS UNDISCLOSED INCOME UNDER SECT ION 68 OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE ITAT CHANDIGARH BENCH IN THE CASE OF SHRI BHUWAN GOYAL VS. DCIT IN ITA NO.1385/CHD/2019 AND SINCE THE FINDINGS OF THE LD.CIT(A) ARE NOT IN ACCORDANCE WITH THE DECISI ON OF THE JURISDICTIONAL TRIBUNAL, THE SAME IS LIABLE TO BE S ET ASIDE. THE LD. COUNSEL FURTHER POINTED OUT THAT AS PER THE DECISION ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 4 OF 9 OF THE DELHI BENCH OF THE ITAT, IN THE CASE OF M/S. AGSON GLOBAL PRIVATE LTD. ITA NO. 3741-3746/DEL/2019, INCOME WHICH IS THE PART OF THE PROFIT AND LOSS ACCOUNT CA NNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ORDER PASSED BY THE LD.CIT(A) SUBMITTED THAT SECTION 68 OF THE ACT, IS A DEEMING PROVISION, AND ANY SUM CREDITED IN THE BOOKS OF ACC OUNT OF THE ASSESSEE IS TREATED AS UNDISCLOSED INCOME WHERE THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE THE REOF OR IN THE OPINION OF THE AO THE EXPLANATION OFFERED BY TH E ASSESSEE IS NOT SATISFACTORY. IN THIS CASE, SINCE T HE EXPLANATION OFFERED BY THE ASSESSEE REGARDING NATUR E AND SOURCE OF THE AMOUNT IN QUESTION WAS NOT SATISFACTO RILY, THE LD.CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLU DING THE CASES RELIED UPON BY AUTHORITIES BELOW AND THE CASE S RELIED UPON BY LD. COUNSEL DURING THE COURSE OF ARGUMENTS OF THIS CASE. ADMITTEDLY, IN THE PRESENT CASE THE NOTEBOOK ENTRIES CONTAINING ENTRY PERTAINING TO THE BUSINESS OF M/S SHARMA OVERSEAS SERVICES WAS RECOVERED FROM THE POSSESSION OF THE ASSESSEE. THE AUTHORITIES BELOW HAVE NOT REJECTED T HE ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 5 OF 9 CONTENTION OF THE ASSESSEE THAT THE ENTRIES IN NOTE BOOK PERTAINED TO THE BUSINESS CONCERN OF THE ASSESSEE. 8. AS POINTED OUT BY THE LD. COUNSEL THE COORDINATE BENCH IN THE CASE OF SHRI BHUWAN GOYAL (SUPRA), HAS HELD THAT THE AMOUNT SURRENDERED DURING THE SURVEY ACTIO N CANNOT BE TREATED AS UNDISCLOSED INCOME U/S 68 OF T HE ACT IN THE SAID CASE, THE ASSESSEE HAD SURRENDERED AN A MOUNT OF RS.3.64 CRORES IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT, WHICH WAS MADE ON THE BASIS OF THE ENTRIES IN THE POCKET DIARY FOUND AND SEIZED DURING THE COURSE OF SEARCH. THE AUTHORITIES BELOW COMPUTED THE TAX UNDER THE PR OVISIONS OF SECTION 115BBE OF THE ACT. THE MATTER TRAVELLED TO THE ITAT. THE ITAT SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DIRECTED THE AO TO TAX THE ENTIRE SURRENDERED I NCOME OF RS.3.64 CRORES AT THE NORMAL RATE OF TAX. THE FINDI NGS OF THE COORDINATE BENCH READ AS UNDER: 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE SURRENDERED THE INCOME OF RS. 3.64 CRORES IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT THE SAID SURRENDER WAS MADE ON THE BASIS OF THE ENTRIES IN THE POCKET DIARY FOUND & SEIZED DURING THE COURSE OF SE ARCH IN WHICH CERTAIN TRANSACTIONS RELATING TO THE REAL ESTATE BU SINESS WERE NOTED AND PROFIT AS WELL AS COMMISSION WAS EARNED THEREON . THE AFORESAID FACTS HAD BEEN MENTIONED BY THE A.O. AT P AGE NO. 4 OF THE ASSESSMENT ORDER DT. 30/12/2018 WHEREIN COPY OF THE SHOW CAUSE NOTICE DT. 26/12/2018 HAS BEEN REPRODUCED. HOWEVER, THE A.O. CONSIDERED ONLY AN INCOME OF RS. 2.64 CRORE EARNED FROM THE REAL ESTATE BUSINESS BUT DID NOT ACCEPT RS. 1 CRORE AND ADDED THE SAME SEPARATELY UNDER SECTION 69 OF THE ACT. THE A.O. CH ARGED THE TAX @ 60% UNDER SECTION 115BBE OF THE ACT. THE PROVISIONS CONTAINED IN THE SAID SECTION I.E; 115BBE OF THE ACT READ AS UND ER: ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 6 OF 9 115BBE. (1) WHERE THE TOTAL INCOME OF AN ASSESSEE, - (A) INCLUDES ANY INCOME REFERRED TO IN SECTION 68, SECT ION 69, SECTION 69A, SECTION 69B, SECTION 69C OR SECTION 69D AND REFLECT ED IN THE RETURN OF INCOME FURNISHED UNDER SECTION 139; OR (B) DETERMINED BY THE ASSESSING OFFICER INCLUDES ANY IN COME REFERRED TO IN SECTION 68, SECTION 69, SECTION 69A, SECTION 69B, S ECTION 69C OR SECTION 69D, IF SUCH INCOME IS NOT COVERED UNDER CLAUSE(A), THE INCOME-TAX PAYABLE SHALL BE THE AGGREGATE OF- (I) THE AMOUNT OF INCOME-TAX CALCULATED ON THE INCOME R EFERRED TO IN CLAUSE(A) AND CLAUSE(B), AT THE RATE OF SIXTY PER CENT; AND (II) THE AMOUNT OF INCOME-TAX WITH WHICH THE ASSESSEE WO ULD HAVE BEEN CHARGEABLE HAD HIS TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME REFERRED TO IN CLAUSE(I). 2. NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF OF ANY LOSS SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY PROVISION OF THIS ACT IN COMPUTI NG HIS INCOME REFERRED TO IN CLAUSE(A) AND CLAUSE (B) OF SUB-SECTION (1). FROM THE AFORESAID PROVISIONS IT WOULD BE CLEAR THA T THE PROVISIONS OF SECTION 115BBE (1)(A) OF THE ACT ARE APPLICABLE TO THE INCOME WHICH IS REFERRED IN SECTION 68, 69, 69A, 69 B, 69C OR 69D REFLECTED IN THE RETURN OF INCOME FURNISHED UNDER S ECTION 139 OF THE ACT. HOWEVER, IN THE PRESENT CASE NO SUCH INCOME WA S REFLECTED IN THE RETURN FILED UNDER SECTION 139 OF THE ACT RATHE R THE INCOME WAS DECLARED IN THE RETURN FILED UNDER SECTION 153A OF THE ACT AFTER THE SEARCH. THE ASSESSEE DECLARED THE INCOME UNDER SECT ION 132(4) OF THE ACT AND DISCLOSED THE SAME IN THE RETURN OF INC OME FILED UNDER SECTION 153A OF THE ACT. THE ASSESSEE EXPLAINED THE SOURCE OF INVESTMENT OF RS. 1.10 CRORE IN THE REPLY TO QUESTI ON NO. 11 WHICH HAS BEEN REPRODUCED AT PAGE NO. 8 OF THE IMPUGNED O RDER BY THE LD. CIT(A) AND READ AS UNDER: Q. 11. DO YOU WANT SAY ANYTHING ELSE? ANS: YES, ONE AGREEMENT DATED 05/04/2016 WAS FOUND FROM RESIDENCE AT THE TIME OF SEARCH ON 31/08/2016 WHICH WAS EXECUTED BY MR. SUMIT THAPER ON MY BEHALF AND SH. HERNEK SINGH S/O SH. DAULAT SINGH FOR AN AMOUNT OF RS. 1,10,00,000/-. OUT OF THIS AMOUNT OF RS. 10 LACS WA S TRANSFERRED FROM MY BANK ACCOUNT TO MR. SUMIT THAPER WHICH IS DULY ACCO UNTED FOR (PROOF OF THIS WILL BE SUBMITTED LATER ON) AND REST OF THE AMOUNT HAS B EEN PAID IN CASH. THE SOURCE OF RS. 1 CR. PAID IN CASH ARE OUT OF COMMISS ION INCOME AND PROFIT EARNED FROM REAL ESTATE TRANSACTION IN PAST. HOWEVER, NO D OCUMENTARY EVIDENCE IS AVAILABLE WITH ME. HENCE TO BUY PEACE OF MIND AND T O AVOID LITIGATION. I HEREBY VOLUNTARILY OFFER COMMISSION INCOME AS WELL AS PROF IT EARNED ON REAL ESTATE TRANSACTIONS AS AN ADDITIONAL INCOME OF RS. 1 CR. ( ONE CRORE) OVER AND ABOVE MY NORMAL INCOME FOR THE F.Y. 2016-17 RELEVANT TO A .Y. 2017-18 SUBJECT TO NO PENAL ACTION. I HEREBY REITERATED THAT THESE TRANSA CTIONS WERE ENTERED BY ME IN INDIVIDUAL CAPACITY AND NOTHING TO DO WITH THE COMP ANY I.E. M/S A.P. REFINERY PVT. LTD. THE SAID EXPLANATION GIVEN BY THE ASSESSEE TO THE L D. CIT(A) HAS NOT BEEN REBUTTED, THEREFORE THE PROVISI ONS OF SECTION 69 OF THE ACT WERE NOT APPLICABLE AS THE BUSINESS TRAN SACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE E ITHER EARNED ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 7 OF 9 COMMISSION OR PROFIT ON ALL THOSE REAL ESTATE TRANS ACTIONS. THE INCOME EARNED FROM THE REAL ESTATE TRANSACTIONS WAS CLAIMED TO BE UTILIZED FOR MAKING THE INVESTMENT IN THE PROPERTY. IN THE PRESENT CASE IT IS NOT BROUGHT ON RECORD TO SUBSTANTIATE TH AT THE SAID INCOME WAS UTILIZED BY THE ASSESSEE ELSEWHERE AND NOT IN T HE INVESTMENT OF THE PROPERTY. THEREFORE, WE ARE OF THE VIEW THAT TH E A.O. WAS NOT JUSTIFIED IN TAXING THE AFORESAID INCOME OF RS. 1 C RORE SEPARATELY PARTICULARLY WHEN NOTHING IS BROUGHT ON RECORD TO S UBSTANTIATE THAT THE ASSESSEE HAD MADE SEPARATE INVESTMENT DIFFERENT FROM THE INCOME EARNED ON REAL ESTATE TRANSACTIONS RECORDED IN THE POCKET DIARY FOUND & SEIZED DURING THE COURSE OF SEARCH. A CCORDINGLY, THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THIS ISS UE IS SET ASIDE AND THE A.O. IS DIRECTED TO TAX THE ENTIRE SURRENDE RED INCOME OF RS. 3.64 AT THE NORMAL RATE OF TAX. 9. FURTHER, SECTION 68 OF THE ACT, APPLIES WHERE AN Y SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNT MAINTAINE D BY THE ASSESSEE FOR ANY PREVIOUS YEAR AND THE ASSESSEE FAI LS OFFER ANY EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION BY THE ASSESSEE IS NOT SATISFACTORY IN THE OPINION OF THE AO, THE SUM SO CREDITED MAY BE TREATED AS IN COME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THE PRESENT CASE THE ASSESSEE HAS EXPLAINED THE NATURE AND SOURCE OF THE AMOUNT IN QUESTION AND TO SUBSTANTIATE HIS CONTENTION SUBM ITTED CASH FLOW STATEMENT. WE FURTHER NOTE THAT THE AO HA S NOT GIVEN HIS FINDINGS ON THIS POINT. WE, THEREFORE, FI ND MERIT IN THE CONTENTION OF THE ASSESSEE THAT IN THE ABSENCE OF ANY ADVERSE FINDINGS BY THE AO ON THE SOURCE OF EARNING OF THE ASSESSEE, THE AUTHORITIES BELOW HAVE WRONGLY TREATE D THE AMOUNT IN QUESTION AS UNDISCLOSED INCOME U/S 68 OF THE ACT AND COMPUTED THE TAX LIABILITY UNDER THE PROVISIONS OF SECTION 115BBE OF THE ACT. ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 8 OF 9 10. IN THE LIGHT OF THE DISCUSSIONS MADE IN THE FOR EGOING PARAS, WE ARE OF THE CONSIDERED VIEW, THE SOLE GROU ND RAISED BY THE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF SHRI BHUWAN GOYAL (SUPRA) DISCUSSED ABOVE. SINCE THE FINDINGS OF THE LD. CIT(A) ARE NOT IN CONSONANCE WITH THE DECISION OF T HE COORDINATE BENCH, WE HOLD THAT THE LD.CIT(A) HAS ER RED IN UPHOLDING THE ACTION OF THE AO IN TREATING THE AMOU NT IN QUESTION AS UNDISCLOSED INCOME U/S 68 OF THE ACT. H ENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN THE CASE DISCUSSED ABOVE, WE ALLOW THE APPEAL OF THE ASSESSEE AND SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). ACCORDINGLY, WE DIRECT THE AO TO COMPUTE TH E TAX ON THE SAID AMOUNT TREATING THE SAME AS BUSINESS INCOM E OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 11.05.2021. SD/- SD/- (N. K. SAINI) (R.L. NEGI) (VICE PRESIDENT) (JUDICIAL M EMBER) DATED: 11 TH MAY, 2021 * - * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT ITA NO.327/CHD/2020 A.Y .2017-18 PAGE 9 OF 9 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35# / GUARD FILE &) ' / BY ORDER, 6 ! / ASSISTANT REGISTRAR