Pawan Kumar (HUF), Gharsana V. ITO, Suratgarh.

ITA 371/JODH/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4364 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 23-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHR RAJENDRA JAIN
• Keywords: Unexplained investment; Business income; Loose papers; Maximum Marginal Rate; Deemed to accrue or arise in india; Set aside
• Section: 69C; 133A; 143(1); 69B; 68; 69; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH (SMC), JODHPUR BEFORE SHRI N.K. SAINI, VICE PRESIDENT ITA NO. 371 /JODH/2018 (ASSESSMENT YEAR-2014-15) SHRI PAWAN KUMAR (HUF), GHARSANA VS THE ITO, SURATGARH (APPELLANT) (RESPONDENT) PAN: AAMHP2566A ITA NO. 372 /JODH/2018 (ASSESSMENT YEAR-2014-15) SHRI DEEPAK KUMAR (HUF), GHARSANA VS THE ITO, SURATGARH (APPELLANT) (RESPONDENT) PAN: AAHHD3018G ITA NO. 373 /JODH/2018 (ASSESSMENT YEAR-2014-15) SMT. POOJA GOYAL GHARSANA VS THE ITO, SURATGARH (APPELLANT) (RESPONDENT) PAN: AODPG3352A ITA NO. 374/JODH/2018 (ASSESSMENT YEAR-2014-15) SMT. RANI BANSAL GHARSANA VS THE ITO, SURATGARH (APPELLANT) (RESPONDENT) PAN: APMPB1746F 2 ITA NO. 375 /JODH/2018 (ASSESSMENT YEAR-2014-15) SHRI GULJAARI LAL (HUF), GHARSANA VS THE ITO, SURATGARH (APPELLANT) (RESPONDENT) PAN: AAFHG8618F REVENUE BY SH. P.K. SINGI, DR ASSESSEE BY SHR RAJENDRA JAIN, ADVOCATE DATE OF HEARING 09.05.2019 DATE OF PRONOUNCEMENT 10.05.2019 O R D E R THESE FIVE APPEALS BY DIFFERENT ASSESSEES ARE DIREC TED AGAINST THE SEPARATE ORDERS EACH DATED 18.4.2018 OF LD. CIT(A), BIKANER 2. SINCE THE ISSUE INVOLVED IN ALL THE APPEALS IS C OMMON AND THE APPEALS WERE HEARD TOGETHER, SO THESE ARE BEING DIS POSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 3. AT THE FIRST INSTANCE, I WILL DEAL WITH THE APPE AL IN ITA NO. 372/JODH/2018 IN THE CASE OF SHRI DEEPAK KUMAR (HUF). 4. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 3 1. THAT THE ORDER PASSED BY THE LEARNED A.O. IS AGA INST THE LAW AND FACTS APPLICABLE IN THE CASE OF THE ASS ESSEE. 2. THAT THE APPLICABILITY OF SECTION 115BBE IN THE CASE OF SURRENDERED INCOME IN THE COURSE OF SURVEY IS DEBAT ABLE ISSUE AND HENCE IS NOT COVERED UNDER THE PREVIEW OF SECTI ON 154 AND IT IS NOT A MISTAKE APPARENT FROM RECORDS. 3. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED A.O. HAS ERRED IN CHARGING THE MAXIMUM MARGINAL RATE OF 30% BY APPLYING THE PROVISIONS OF SECTION 115BBE. 4. THAT THE ASSESSEE CRAVE THE LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE GROUNDS OF APPEAL. 5. FACTS OF THE CASE IN BRIEF ARE THAT A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') WAS CONDUCTED AT THE BUSINESS PLACES OF THE ASSESSEE'S VARIOUS FIRMS. DURING THE COURSE OF SURVEY, CERTAIN DISCREPANCIES WERE NOTICED AND LOOSE PAPERS ALONGWI TH INCRIMINATING DOCUMENTS WERE FOUND. THE ASSESSEE SURRENDERED A SU M OF RS. 7 LACS AS ADDITIONAL INCOME IN THE YEAR UNDER CONSIDERATION. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE DATED 18.11.2016 U/ S 154 OF THE ACT STATING THAT THE INCOME WHICH WAS SURRENDERED DURI NG THE COURSE OF SURVEY ATTRACTED PROVISIONS OF SECTION 69 OF THE AC T AND AS PER THE SECTION 115BBE OF THE ACT, THE TAX SHOULD HAVE BEEN CALCULATED @ 30%. THE ASSESSING OFFICER SOUGHT THE EXPLANATION OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT SINCE THE PR OVISIONS OF SECTION 69 WERE NOT APPLICABLE IN THIS CASE, THEREFORE, SECTI ON 115BBE SHOULD NOT 4 HAVE BEEN APPLIED AND FURNISHED WRITTEN SUBMISSIONS WHICH IS INCORPORATED BY THE ASSESSING OFFICER IN ORDER DATE D 26.12.2016, PASSED U/S 154 OF THE ACT AND READ AS UNDER:- 1. IT IS TRUE THAT THE ASSESSEE HAD SURRENDERED A SUM OF RS.7 LAC AS INCOME FOR THE A.Y.2014-15 AT THE TIME OF SU RVEY, BEING THE MARKET VALUE OF 155 BAGS OF GUAR LYING IN HIS ACCOUNT BUT NOT ACCOUNTED FOR IN THE BOOKS OF ACCOU NT ON 13.03.2014. 2. BUT THE SAID 155 BAGS OF GUAR WAS DULY RECORDED IN HIS BOOKS OF ACCOUNTS AFTER 13.03.2014 BUT BEFORE 31.0 3.2014 AND ADVANCE TAX WAS PAID THEREON. FURTHER THE ITR U /S 139(1) OF THE ACT, 1962 WAS FILED ON 30.07.2014 AND DUE TA X WAS PAID THEREON. 3. THE ASSESSEE HAS FILED THE COPY OF HIS CAPITAL A CCOUNT AND BALANCE SHEET AS AT 31.03.2014. 4. SECTION 69 OF THE INCOME TAX ACT, 1961 IS OPERA TIVE ONLY WHEN THE INVESTMENT IS NOT 'RECORDED IN THE BOOKS O F ACCOUNT OF THE ASSESSEE AT THE TIME OF ASSESSMENT IN THE SA ID CASE THE ASSESSEE HAD RECORDED. THE VALUE OF 155 BAGS OF GUAR IN HIS BOOKS OF ACCOUNTS, BEFORE FILING OF INCOME TAX RETURN U/S 139(1) OF THE I.T.ACT, 1961 AND DUE TAX WAS PAID TH EREON. HOWEVER, IT IS TRUE THAT AT THE TIME OF SURVEY THE SAID STOCK WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE AS SESSEE. SO I REQUEST YOU TO PLEASE ASSESSEE THE SURRENDERED INCOME OF THE ASSESSEE AT NORMAL RATE OF TAX AND NOT AT THE S PECIAL RATE OF TAX U/S 115BBE OF THE INCOME TAX ACT, 1961' 6. THE ASSESSING OFFICER HOWEVER, WAS NOT SATISFIED FROM THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE SURR ENDERED AMOUNT WAS SUBJECT TO TAX @ 30% U/S 115BBE OF THE ACT. 5 7. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER;- 'IN THIS REGARD IT IS STATED THAT THERE WAS A SURVE Y AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING TH E COURSE OF SURVEY UNRECORDED STOCK OF GUWAR OF RS.7,00,000/- WAS FOUND. THIS WAS NOT FOUND RECORDE D IN THE BOOKS OF ACCOUNTS AS THE BOOKS OF THE ASSESS EE WERE NOT COMPLETE AT THAT TIME. ANYHOW WITHOUT GOIN G INTO CONTROVERSY THE ASSESSEE HAS AGREED TO DISCLOS E THIS AS INCOME IN THE INCOME TAX RETURN AND ALSO AGREED TO PAY THE TAX ON THE SAME. ACCORDINGLY THE ASSESSEE HAS FILED THE RETURN OF INCOME AND DISCLOS ED THESE ITEMS AS INCOME FROM BUSINESS AND PROFESSION AND PAID THE DUE TAX ACCORDINGLY.' 8. IT WAS FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 69 DEALS WITH UNEXPLAINED INVESTMENT BUT THE ASSESSEE WAS FO UND IN POSSESSION OF STOCK OF GUWAR WHICH WAS NOT AN INVESTMENT, IN FACT , IT WAS THE STOCK IN TRADE AND HENCE THE PROVISIONS OF SECTION 69 OF TH E ACT WERE NOT APPLICABLE. IT WAS ALSO STATED THAT ASSESSEE SURREN DERED THE INCOME UNDER THE HEAD 'INCOME FROM BUSINESS AND PROFESSION' IN W HICH THE PROVISIONS OF SECTIONS 68 TO 69D OF THE ACT WERE NOT APPLICABL E. 9. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE SURVEY WAS CONDUCTED U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE DURING WHICH TH E ASSESSEE OFFERED AN AMOUNT OF RS. 7 LACS ON ACCOUNT OF INCRIMINATING DO CUMENTS AND 6 DISCREPANCIES, HOWEVER, HE CALCULATED THE TAX ON SU RRENDERED INCOME AT NORMAL RATE WHICH WAS PROCESSED U/S 143(1) OF THE A CT AND SUBSEQUENTLY WAS RECTIFIED BY THE ASSESSING OFFICER U/S 154 OF T HE ACT. ACCORDING TO HIM, THE SURRENDERED INCOME FELL WITHIN THE PROVISI ONS OF SECTION 69 / 69A / 69B / 69C OF THE ACT AND WAS TO BE TREATED AS DEEMED INCOME AS IT WAS UNRECORDED TILL THE TIME IT WAS FOUND OUT BY WA Y OF SURVEY PROCEEDINGS. THEREFORE, THE ASSESSEE WAS REQUIRED T O CALCULATE THE TAX AS PER THE PROVISIONS OF SECTION 115BBE OF THE ACT. SO , THERE WAS CLEARLY A MISTAKE OF CALCULATION OF TAX WHICH FALLS WITHIN T HE EXPRESSION 'MISTAKE APPARENT FROM RECORD. ACCORDINGLY, THE ACTION OF T HE ASSESSING OFFICER WAS CONFIRMED. 10. NOW THE ASSESSEE IS IN APPEAL. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE WAS HIGHLY DEBATABLE, SO, THE PROVISIONS OF SECTION 115 BBE WERE NOT APPLICABLE. RELIANCE WAS PLACED ON THE DECISION O F THE ITAT JODHPUR BENCH (SMC) JODHPUR IN ITA NO. 143/JODH/2018 AND OT HERS IN THE CASE OF SHRI LOVISH SINGHAL, SRIGANGANAGAR & ORS. VS. IT O, WARD-2, SRIGANGAGNAGAR FOR THE ASSESSMENT YEAR 2014-15 ORDE R DATED 25.5.2018 WHEREIN IT WAS HELD THAT A SURRENDER OF EXCESS STOC K WAS NOT SUBJECTED TO THE TAX U/S 115 BBE OF THE ACT. A REFERENCE WAS MA DE TO PARA 13 OF THE SAID ORDER, WHICH READS AS UNDER:- 7 '13. I HAVE HEARD THE RIVAL CONTENTIONS AND RECORD PERUSED. I HAVE ALSO CAREFULLY GONE THROUGH THE ORD ERS OF THE AUTHORITIES BELOW. I HAVE ALSO DELIBERATED ON T HE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHO RITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY THE LD AR DURING THE COURSE OF HEARING BEFORE THE ITAT IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM 18 ITA 142 TO 146/JODH/2018 VASU SINGHAL VS ITO WITH 4 ORS. CASES THE RECORD, I FIND THAT DURING THE COURSE OF SURVEY, IN COME WAS SURRENDRED BY THE ASSESSEE ON ACCOUNT OF STOCK, EXCESS CASH FOUND OUT OF SALE OF STOCK AND ALSO IN RESPECT OF INCRIMINATING DOCUMENTS. AS PER JUDICIAL PRONOUNCEMENTS CITED BY THE LD. AR AND ALSO THE DEC ISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF BAJR ANG TRADERS IN INCOME TAX APPEAL NO. 258/2017 DATED 12/09/2017 I OBSERVE THAT THE HON'BLE HIGH COURT IN RESPECT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND SURRENDER MADE THEREOF WAS FOUND TO BE TAXABLE UNDER THE HEAD BUSINESS AND PROFESSION. SIMILARLY IN RESPECT OF EXCESS CASH FOUND OUT OF SALE OF GOODS I N WHICH THE ASSESSEE WAS DEALING WAS ALSO FOUND TO BE TAXAB LE AS BUSINESS INCOME. APPLYING THE PROPOSITION OF LAW LA ID DOWN IN THE JUDICIAL PRONOUNCEMENTS AS DISCUSSED AB OVE, I HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIE D IN TAXING THE SURRENDER MADE ON ACCOUNT OF EXCESS STOC K AND EXCESS CASH FOUND U/S 69 OF THE ACT. THUS, THERE IS NO JUSTIFICATION FOR TAXING SUCH INCOME U/S 115BBE OF THE ACT.' 12. ON THE BASIS OF ABOVE, IT WAS SUBMITTED THAT T HIS ISSUE WAS A DEBATABLE ISSUE, THEREFORE, PROVISIONS OF SECTION 1 54 OF THE ACT WERE NOT APPLICABLE. 8 13. IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 14. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESEN T CASE, IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER INVOKED T HE PROVISIONS OF SECTION 154 OF THE ACT AND HELD THAT THE SURRENDER ED AMOUNT OF THE ASSESSEE WAS SUBJECTED TO TAX @ 30% AS PER THE PROV ISIONS OF SECTION 115BBE OF THE ACT. HOWEVER, ON THE SAID ISSUE THE I TAT JODHPUR (SMC) BENCH VIDE ITS AFORESAID REFERRED TO ORDER DATED 25 .5.2018 HELD THAT THE PROVISIONS OF SECTION 115BBE OF THE ACT WERE NOT A PPLICABLE IF THE SURRENDER WAS MADE ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. SO, THE ISSUE WAS A DEBATABLE, THEREFORE , THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSES SING OFFICER FOR MAKING THE RECTIFICATION U/S 154 OF THE ACT. ACCORD INGLY, THE IMPUGNED ORDER IS SET ASIDE AND IT IS HELD THAT THE PROVISIO NS OF SECTION 154 OF THE ACT WERE NOT APPLICABLE IN THE PRESENT CASE AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE RECTIFICATIONS U/S 154 OF THE ACT. 15. THE FACTS IN OTHER APPEALS OF THE ASSESSEES (IT A NOS. 371/JODH/2108 & 373 TO 375/JODH/2018) ARE SIMILAR AS WERE INVOLVED IN THE AFORESAID APPEAL IN ITA NO. 372/JODH/2018 FOR THE ASSESSMENT YEAR 9 2014-15 IN THE CASE OF SHRI DEEPAK KUMAR HUF, THERE FORE, MY FINDINGS GIVEN IN FORMER PART OF THIS ORDER SHALL APPLY MUT ATIS MUTANDIS IN THESE CASES OF ALL OTHER ASSESSEES. 16. IN THE RESULT, THE APPEALS OF THE ASSESSEES AR E ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 10.05.2019) SD/- (N.K. SAINI) VICE PRESIDENT DATED : 10 .05.2019 .. I / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / CIT 4. ( )/ THE CIT(A) 5. , ! , $ / DR, ITAT, JODHPUR 6. ' / GUARD FILE / BY ORDER / ASSISTANT REGISTRAR