M/s Supreme Petro Foam Industry , Ludhiana V. DCIT, CC-1, Ludhiana

ITA 40/CHANDI/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6644 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-09-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 30-01-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Revision of order; Depreciation; Income from undisclosed sources; Loose papers; Deemed to accrue or arise in india; Capital Gains
• Section: 68; 69; 263; 69C; 139; 40(b); 142(1); 133A; 143(1); 69B; 143(2); 69A; 64; 44AB; 43; 48; 13; 153; 22

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 40/CHD/2023 Ǔनधा[रण वष[ / Assessment Year : 2019-20 M/s Supreme Petro Foam Industry, Ratan Paltan Road, Village Ikolaha Khanna, District Ludhiana 141401 Vs. बनाम The DCIT, Central Circle-1, Ludhiana èथायी लेखा सं./PAN No. ADDFS0849P अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Ashwani Kumar, CA राजèव कȧ ओर से/ Revenue by : Shri Dharamvir, JCIT Sr.DR स ु नवाई कȧ तारȣख/Date of Hearing : 20.09.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 11.10.2023 आदेश/Order Per A.D. Jain, Vice President: This is Assessee’s appeal against the order of the ld. CIT(A)-5, Ludhiana, dated 04.01.2023, for the Assessment Year 2019-20, taking the following Grounds of appeal: 1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-5, Ludhiana is against law and facts on the file in as much he was not justified to uphold the action of the Learned Assessing Officer in treating the income of Rs. 90,00,000/- offered as business income during the course of survey u/s 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 2 133A to be taxed as deemed income u/s 69 and taxed as per provisions of Section 115BBE. 2. That he was further not justified in upholding the action of the Learned Assessing Officer in disallowing the depreciation claimed at Rs. 2,50,000/- by holding that the same can not be allowed against alleged unexplained investment offered as additional income during the course of survey u/s 133A. 2. Briefly the facts of the case are that a survey u/s 133A of the Income Tax Act was carried out at the business premises of the Assessee on 05.09.2018 and during the course of survey operations, certain discrepancies were noticed and Assessee came forward and surrendered a sum of Rs.90,00,000/-. Thereafter, the Assessee filed its return of income, declaring total income of Rs.1,34,86,670/- on 17.12.2019 including the surrendered income, which was processed u/s 143(1) and thereafter, the case of the Assessee was selected for compulsory scrutiny and notices u/s 143(2) and 142(1) were issued. During the course of assessment proceedings, the AO also issued a Show Cause Notice dated 10.02.2021 stating that as per the Surrender Letter, the Assessee has made a surrender for a sum of Rs. 40 lacs on account of difference in stock and Rs. 50 lacs on account of construction of building and the same has been offered in 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 3 the return of income @ 30%, however, as per the provisions of Section 115BBE read with Section 69 and 69A, the amount so surrendered is taxable @ 60%. 3. In response to the show-cause, the Assessee filed his submissions stating that the query relating to the discrepancy in stock found at Rs. 2.92 crores as per the physical inventory whereas as per Manufacturing and Trading Account drawn on the date of survey i.e. 05.09.2018, the stock comes to Rs.2.52 crores. With regard to the reason for excess stock found and why the same be not added to the income u/s 69 r.w.s. 115BBE of the Act, the Assessee submitted that the Assessee firm through its partner and is the part of the total surrendered income made at Rs.90.00 lacs. Since, the income has already been offered and is a part of Profit & Loss Account, it does not remain undisclosed / unexplained and should not be part of unexplained investment as defined in Section 69 of the Income Tax Act, 1961. In addition to this, the income has been offered as business income and a part of the trading results. Therefore, there is no reason to consider the same to be taxed at a higher rate as per the provisions of Section 115BBE of the Income Tax Act,1961. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 4 3.1 As regards the treatment of surrendered income of Rs.90 Lacs on account of stock of Rs.40 Lacs and expenditure incurred on construction of Building at Rs. 50 lacs, it was submitted that the Assessee firm has credited a sum of Rs. 90 Lacs to its profit and loss account as income disclosed under Survey. Further a sum of Rs.40 lacs was added to the trading account which has resulted into / impacted the value of closing stock as well at the year end. As far as the other Rs.50 Lacs which was surrendered on account of building the same stand debited to building account. Copy of building account has already been submitted elsewhere in the reply. The Assessee had treated the additional income as a part of its business income. Further the perusal of the surrendered letter revealed that the Assessee firm had surrendered the additional income over and above the normal book results of the current financial year i.e. F.Y. 2018-19 subject to no penalty or any penal action under the Income Tax Act, 1961. Further, it was specifically mentioned in the surrendered letter that the said additional income shall be taxed at the normal rate of income tax since the said income was earned by the Assessee firm out business transactions in the current year. Accordingly, the Assessee firm has calculated and mentioned 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 5 of amount of tax due on the additional income. The said tax was worked out at Rs. 28.08 Lacs. Since the assessed firm has disclosed the source of earing of the additional income and the ld. Authorized Officer had nowhere controverted the mode of earning disclosed by the Assessee firm as mentioned in the surrender letter. Therefore, the mode of earning of the additional income i.e. from business transactions of the current year and also the tax calculated thereon, have not been disputed at all. In these circumstances, the additional income declared by the Assessee firm as business income be assessed under the head Profits and gains from Business and Profession. Thereby the same cannot by any stretch of imagination be taxed at higher rate as per the provisions of section 115BBE of the Act. 4. The submissions of the Assessee were considered but not found acceptable by the A.O. It was, as reproduced hereafter, upto para 4.11, held by the A.O., that no cogent reasons supported by documentary evidence were being cited by him. The submissions given by the Assessee with regard to its excess stock and investment in construction of building were not tenable as the Assessee was not able to establish nexus between the surrendered amount and its 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 6 business affaires supported by documentary evidences. The Assessee was not able to substantiate the source of income for making investments in stock and construction of building as discussed above. The Assessee had to give a proper explanation and disclose facts which were in his exclusive knowledge. The Assessee had no option to remain selective, elusive, evasive or restrained in disclosure. After such explanation, the AO had to ascertain the correctness of the Assessee's submissions on the basis of material available on record, the surrounding circumstances, the conduct of the Assessee, the preponderance of probabilities and the nature of incriminating information/evidence available with him. If the AO was not satisfied with submissions of the Assessee, adjudication can be done even if the same is adverse to the Assessee. 4.1 The plea of the Assessee that it was accepted by the revenue that the surrendered income on account of excess stock and investment in construction of building will be taxed as per business proceeds is merely a presumption on the part of the Assessee which cannot be construed as a reason for charging the tax on surrendered income as business proceeds. However, in this regard it was mentioned 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 7 that the on is on the Assessee that the unexplained receivables were out of business proceeds. 4.2 Reliance was placed on the Delhi ITAT order dated 4.1.20211, in “Haresh Win Chaddha vs. DCIT (Int. Taxation), Delhi, in ITA No. 3088 to 3098 and 3107/del/2015. It was further observed that therefore, on account of failure of the Assessee to substantiate as to how receivables were part of his business proceeds, the provisions of section 69 of the Income Tax Act, 1961 respectively are required to be invoked. A detailed discussion in this regard was being made in forthcoming paras. 4.3 The Assessee has not divulged any details regarding bills / challans / transport details/ labour charges/ debit / credit notes / vouchers for such purchases & sales and sources of funds being received/transferred through banking channels, etc. pertaining to such transactions/stock/sales, etc. The complete details including PANs of persons to whom sales / purchases have been made resulting in the accumulation of excess stock of Rs.40 Lakhs and investment in construction of building of Rs. 50 Lakhs on the date of survey and details regarding bills / challans / transport details / labour charges / debit /credit notes / 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 8 vouchers had not been furnished / divulged by the Assessee during assessment proceedings. Failure in furnishing such details by the Assessee has helped his suppliers and buyers to evade not only income tax on their unaccounted sales and purchases but also from the clutches of various penal provisions of the Income Tax Act and other taxes also. 4.4 In this case, a survey operation was conducted on business premises of the Assessee on 05.09.2018 wherein excess stock of Rs.40 laks and investment in construction of building of Rs.50 Lakhs was found on the business premises of the Assessee. The same aggregating to Rs. 90,00,000/-had been surrendered as income by the Assessee under the head business income. The Assessee's ITR showed that it has maintained books of accounts of the relevant year and had got its accounts audited u/s 44AB of the Act and it has offered the income of Rs. 90,00,000/- as surrendered income. From this detail, it was evident that the Assessee itself has not shown passed on the requisite accounting entries in its books of account. Only resultant income had been shown on credit side of the P & L Account. 4.5 In view of the above facts, the matter is being decided on the basis of material available on the record and on 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 9 merits. I have carefully considered the material available on record. Section 115BBE of the Act provides that where the total income of an Assessee includes any income referred to in Sections 68, 69, 69A, 69B, 69C or 69D (specified income) of the Act and such income is (a) reflected in the ITR furnished u/s 139 of the Act; or (b) which is determined by the AO; then the income tax payable in respect of such income would be @ 60%. The applicability of Section 115BBE of the Act is attracted only on deemed incomes u/s 68 to 69D of the Act shown in the ITR or assessed by the AO. In other words, the unexplained credit / stock /investment in assets /expenditure /cash, etc., which were found not recorded in books of account, if any, and the explanation offered regarding nature & source thereof is not satisfactory, then value of such unexplained credit / stock /investment in assets / expenditure /cash, etc., are required to be taxed u/s 68 to 69D of the Act. 4.6 Here, the material available on the record showed that the Assessee had not recorded all the financial entries in its books of account; cash book, ledger, journal, etc. It is natural that if any person is not recording particular transaction / receipt in books of accounts, he would not 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 10 have done so even subsequently, had not the search / survey or enquiry been carried out by the Department. The books of accounts can always have some genuine time lag between the happening of business transactions and recording of some entries in accounts on real-time basis for multiple reasons. There can be no denial from this situation. But in a genuine and bona-fide situation, there would always be availability of basic documents as evidence to support such unrecorded transactions in the form of bills /vouchers / transport details/ labour charges/challans/payment receipts/bank statement, etc. If that be so, the updating of the accounts subsequent to survey to arrive at the correct position would still be permissible because the source of such entries is already backed by necessary evidences found during the survey/enquiries itself. Therefore, the benefit of recording entries in books of accounts of any business being carried subsequent to survey would not be available to claim that such income was part of business income only, if the necessary bills / challans / debit /credit notes/ vouchers for expenses / receipts, sources of funds being received / transferred through banking channels, etc., pertaining to such transaction / stock / investment /cash, were not available. Hence, even though the Act does not specify as to 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 11 at what point of time the entries are required to be recorded in accounts, if any maintained but since the event of not recording can be ascertained only when detected by the Department during any search /survey /enquires, therefore, in the context the point of time when the non-recording in accounts is to be tested, shall be the point when it was detected initially during survey and not at any later date when they were recorded subsequent to survey. 4.7 In the above situation, mere recording it in books of accounts subsequently without any corroborating evidences to support such entries and offering the same to tax as income in the ITR for the search / survey AY, would also not meet the conditions of recording in accounts and offering the satisfactory explanation with regards to nature & source thereof. 4.8 The decision of the Hon'ble Madras HC in ‘M/s ‘VS Oils Mills, Vs. The Assistant Commissioner of Income Tax’, in ITA No. 765 of 2018 supports the view that mere subsequent recording in books of accounts, does not take away such income representing undisclosed assets such as stock / receivables / cash /money / bullion, etc., out of 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 12 sweep of 69/69A/69B, etc., of the Act and they do not ipso facto be treated as part 3f business income. Recording of such entries to make them as part of bus less income can be permissible only when the entries subsequently recorded as part of business transactions are based on other collateral evidences already found during search / survey such as bills / challans /transport details / labour charges/ debit / credit notes / vouchers for expenses / receipts, funds being received / transferred through banking channels, etc., even though not recorded in books till that date. Therefore, unless the subsequent recording done in books of accounts maintained for any particular business / profession and the same is supported by bills / challans /transport details / labour charges / debit / credit notes /vouchers for expenses / receipts, funds being received / transferred through banking channels, etc., available during search / survey, the linkage of such transactions / entries to the regular business income does not get established so as stock/receivables/cash/money/bullion, etc. out of sweep of 69 /69A /69B, etc., of the Act and they do not ipso facto be treated as part of business income. Recording of such entries to make them as part of bus less income can be permissible only when the entries subsequently recorded as part of 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 13 business transactions are based on other collateral evidences already found during search / survey such as bills / challans / transport details / labour charges / debit / credit notes / vouchers for expenses / receipts, funds being received/transferred through banking channels, etc. even though not recorded in books till that date. Therefore, unless the subsequent recording done in books of accounts maintained for any particular business / profession and the same is supported by bills/challans/transport details / labour charges / debit / credit notes / vouchers for expenses / receipts, funds being received/transferred through banking channels, etc., available during search / survey, the linkage of such transactions /entries to the regular business income does not get established so as to take such transactions / assets to be part of the same business income for which accounts were being maintained. Such income would fall into residual head of income and not as business income. 4.9 It has been held by the Hon'ble High court in ‘Fakir Mohamad Haji Hasan Vs CIT’, 247 ITR 290 (Guj) that expression "save as otherwise provided by this Act" used in section 14 of the Act, clearly leaves the scope for deemed income of nature covered under scheme of section 69, 69A, 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 14 69B and 69C of the Act being treated separately, because such deemed income is not income from salary, house property, profit and gains of business or profession or capital gains nor the income from other sources. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads will be not be attracted in the case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C of the Act in view of the scheme of such provisions. Similarly, the Punjab and Haryana High Court in case of ‘Kim Pharma Pvt Ltd. Vs CIT’, 216 Taxman 153 (P&H) held that the unexplained money disclosed during survey, which was not reflected in books of accounts and no source from where it was derived was declared by the Assessee, was assessable as deemed income u/s 69A of the Act and not the business income. Further, the jurisdictional High Court in the case of ‘Pr. CIT Vs. Khushi Ram & Sons Foods Pvt. Ltd.’, in ITA No.126 of 215 has also held that "merely because an Assessee carries on certain business, it does not necessarily follow that the amount surrendered by him ire on account of its business transactions. There is no presumption that absent anything else an amount surrendered by the Assessee is his 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 15 business income. It is for the Assessee to establish the source of such surrendered amour.” 4.10 In view of the above discussion, I am of the considered view that the excess stock of Rs. 40 Lakhs and investment in construction of building of Rs.50 Lakhs being unaccounted / unexplained is not taxable under the head business income unless the same are duly corroborated by bills / challans / transport details / labour charges / debit /credit notes / vouchers / receipts, funds being received / transferred through banking channels, etc., even though not recorded in books till the date of survey. In the case in hand, no such details have been found available on the record which substantiate the claim of the Assessee. Accordingly, after examining the evidences and the materials on the record, the surrendered income of Rs. 90,00,000/- being unaccounted / unexplained and being not found duly corroborated by bills / challans / transport details / labour charges / debit credit notes / vouchers / receipts, funds being received / transferred through banking channels, etc., the same is to be assessed under Section 69 of Income Tax Act. The surrendered income of Rs. 90,00,000/- is to be taxed as per the provisions of section 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 16 115BBE of the Income Tax Act, 1961. Penalty proceedings u/s 271AAC of the Act on account of unexplained / unaccounted stock / investment in construction are initiated simultaneously. 4.11 However, while doing so it is noticed that the Assessee has, in addition to claiming the surrendered income as business proceeds, deducted an amount of Rs. 2,50,000/- on account of depreciation from the returned income in its P&L Account. In this regard reliance is placed on the provisions of Section 115BBE (2) of the Income Tax Act, 5. Being aggrieved, the Assessee carried the matter in appeal before the ld. CIT(A) who has sustained the said additions. As per the ld. CIT(A), as reproduced hereon to para 5.8, surrender was made during the course of survey on account of excess stock and investment in construction of building of the Assessee. The AR in his submissions has tried to justify the same as business transactions of the Assessee. The AR has claimed that the Assessee was not having any other source of income. Further, the AR relied upon judgments as quoted in his submissions. 5.1 The judgments quoted by the AR have been gone through. It is important to emphasize here that in all the 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 17 judgments quoted by the AR in his support, the ld. Tribunal Benches have very clearly held out that the AO shall give an opportunity to the Assessee to establish a linkage between the surrendered income under the business income, if any. If the Assessee is able to do that then the income can be considered as from business. In the case of the Assessee, the AO gave an opportunity to the Assessee to establish a linkage between the surrendered income under the head of excess stock & investment in construction of building and the business income. 5.2 Merely having a known business activity will not, per se, render any unexplained asset / income as business / profession income u/s 14, unless the burden of proving the source u/s 68 to 69D is also discharged. The onus of proving that such receipts are from an activity other than diseased business activities is not upon the AO. Therefore, there can be no presumption against the deeming fiction u/s 68 to 69D to hold that income/ investment, whose source is not explained, will still be classified as income under any head u/s 14. It would be, therefore, impermissible to attempt and classify such incomes under any of specific heads, even if there is any activity which can be remotely/indirectly 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 18 linked to such deemed income. The word 'source' in the same context would refer to nexus of such income generating activity/transaction with name and identity, creditworthiness of person with whom such activity/transaction was done along with proving the genuineness of transaction also. 5.3 The requirement of proving these three essential ingredients to prove the source in order to escape the rigors of the deeming fiction has been upheld universally. The conjoint burden of proving the 'nature and source' is therefore, not restricted to merely claiming the nexus of any activity / transaction to a particular credit / income /asset but also requires to establish with cogent evidence the nexus of such activity / transaction with source also by providing the name and identity, creditworthiness of person with whom the activity / transaction was done along with proving the genuineness of transaction. 5.4 Thus, for the excess stock & investment in construction of building found during survey proceedings, there can be no presumption to treat the value representing such excess stock & investment in construction of building as application of business income in absence of any evidence of earning 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 19 that income or details as to when, how and from whom such income was derived. 5.5 Accordingly, the arguments of the AR that the surrendered income is to be treated as business income of the Assessee is not acceptable and the additions made u/s 69, are to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The AR has not been able to adduce documentary evidence to establish the nexus between the surrendered income and business and no source for the surrendered income could be related to. 5.6 The ld. CIT(A) relied on - 1. ‘Fakir Mohammed Haji Hasan Vs. CIT’, [2001] 247 ITR 290 (Guj.) 2. ‘PCIT vs. M/s. Khushi Ram & Sons Pvt. Ltd.’, the Hon'ble High Court of Punjab & Haryana in ITA No. 126 of 2015 dated 21.07.2016. 3. ‘SVS Oil Mills vs. ACIT’, Chennai, the Hon'ble High Court of Madras in ITA No. 765 of 2018 dated 26.03.2019. 4. ‘Kim Pharma Pvt. Ltd. vs. CIT’, in ITA No. 106 of 2011 dated 27.04.2011. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 20 5. The Hon'ble Supreme Court in the cases of ‘Roshan Di Hatti vs. CIT’, [1977] 107 ITR 938 (SC). 6. Hon'ble Supreme Court in’ CIT vs. M Ganpati Mudaliar’, [1964] 53 ITR 623 and ‘Govindrajulu Mudaliar vs. CIT’, [1958] 34 ITR 807, and 7. ITAT Cochin Bench, Cochin in the case of ‘M/s. Bhima Jewellers vs. PCIT’, Kozhikode in ITA No. 208/Coch/2018, Assessment Year 2013-14 5.7 It was held that these decisions also bring out a clear legal position that for any income to be treated as business income, the nexus / the source, has to be established. Hence, the action of the AO in applying the rate as prescribed u/s 115BBE on the surrendered income included in the ITR, treated by the Assessing Officer as income u/s 69 in the assessment order, is found sustainable. Keeping in view the above facts and discussion, it is held that the AO has rightly treated the surrender of Rs. 90,00,000/- on account of excess stock & investment in construction of building found during the survey as deemed income u/s 69 and to be taxed as per provisions of Section 115BBE of the Income Tax Act, 1961 and hence the same is confirmed. Accordingly, this ground of appeal is dismissed. 5.8 The ld. CIT(A) also upheld the disallowance of depreciation of Rs. 2.50 lacs on the surrendered amount of 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 21 Rs. 50 lacs on building, holding that the AO was right in disallowing the same as the surrendered income was assessed as unexplained investment u/s 69. As per provisions of Section 115BBE, no deduction can be allowed against the income assessed u/s 69. 6. During the course of hearing before us, ld. AR submitted that the Assessee is a partnership firm engaged in the business of manufacturing and trading of coir foam and mattresses. The return of income for A.Y. 2019-20 was filed on 17.12.2019 declaring total income at Rs. 1,34,86,670/-. The return was accompanied with the audit set of accounts. During the course of survey u/s 133A of the Income Tax Act, 1961 on 05.09.2018, the Assessee had offered an additional income of Rs. 90,00,000/- as business income and was duly declared in the return of income. The same also stood accounted for in the books of account and was a part of the trading account. While framing assessment, the Assessing Officer treated the same as income to be taxed u/s 115BBE of the Act. In addition to this, the Assessing Officer denied the claim of depreciation made at Rs. 2,50,000/- on the ground that the surrendered income has been assessed as unexplained investment u/s 69. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 22 7.1 The contentions on behalf of the Assessee, hereon, to para 11 are thus. During the course of survey, a total stock of Rs. 2,91,78,820/- was found, however, as per the trading account as on date of survey on 05.09.2018, the stock in hand shown in the books is found to be Rs. 2,52,41,775 i.e., difference in stock of Rs. 40 Lakhs found and also found expenditure incurred in construction of building Rs. 50 lakhs. The Assessee offered an additional income of Rs. 90 lacs on account of its business income and a part of trading results. The Assessee firm has credited a sum of 90 lakhs to its profit and loss account as income disclosed under survey. Further a sum of Rs.40 lakhs is added to the trading account which has resulted into / impacted the value of closing stock as well at year end. As far as the other Rs. 50 lakhs which was surrendered on account of building the same stand debited to building account. The Assessee has treated the additional income as a part of its business income. The Assessee has disclosed the source of earning of additional income i.e. from the business transactions of the relevant assessment year. As survey u/s 133A took place on 05.09.2018, some entries were pending to be entered and to be reconciled with the books of accounts due to which differences were found during the survey. The Assessee filed 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 23 its return of income on 17.12.2019 for A.Y. 2019-20 declaring income at Rs. 1,34,86,670/-by including Rs. 90,00,000/- income from business as was declared during the course of survey u/s 133A. However, the Assessing Officer without appreciating the facts and reply submitted from time to time by invoking the provisions of section 69 of the Act treated the same as unexplained investments in the hands of the Assessee. It is important to refer the provisions of section 69 which reads as under: - “Unexplained Investments 69. 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,cand the assess offers no explanation about the nature and source of the investments or 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.” 7.2 From the bare reading of the provisions of section 69 of the Act, it is very much clear that there must be some investments not found in the books of accounts of the Assessee and the Assessee offered no explanation about the nature and source thereof or the explanation offered, was not in the opinion of the Assessing Officer satisfactory, then, the amount invested in the books of the Assessee be charged to 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 24 Income Tax and taxed at the rate of 60%. In the instant case, the Assessee has already declared the additional investments found as business income received by it in the normal course of business. The Assessee had already discharged its obligation to prove the source of investments declared by him, onus shifted to the revenue to disapprove the same, however, the Assessing Officer simply ignoring the facts already accepted in survey and without analyzing the same, arbitrarily invoked the provisions of section 69 of the Income Tax Act. 7.3 Further, the quantum and basis of the amount surrendered had duly been stated by the Assessee in its statement recorded during survey and as declared in the return of income. The same has been accepted as it is, since the Assessing Officer nowhere denied / controverted these facts in the assessment order. The income was offered to tax which stand credited in the profit and loss account of the Assessee for the year under appeal, copy of letter declaring additional income at the time of survey was enclosed. 7.4 The Assessing Officer just simply mentioned that the submissions of the Assessee were not found acceptable as no cogent reasons supported by documentary evidence were 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 25 being cited by it during survey. The same was treated as an unexplained investments u/s 69 and taxed the same at the rate of 60%, thus she failed to prove authoritatively a view taken by her and contrarily whatever the Assessee declared in the return of income. However, the income surrendered during survey was accepted by the AO at that time and the Assessee has also offered the same for taxes while filing its return of income. 7.5 In case, the investment is to be treated as unexplained, the Assessing Officer has to bring on record some conclusive evidence / convincing finding as how the said investment is being treated as unexplained. In the circumstances, it is a bald allegation of the Assessing Officer to consider the income declared as an unexplained investment. Further, merely based on guess work of the Assessing officer, there should not be invocation of provisions of section 69 of the Act. During the course of survey, not even an iota of evidence was found which suggests any contradiction of mode of earning by the Assessee or that the Assessee was engaged / indulged in some other activities to generate any unaccounted income / money. During the course of assessment proceedings, the Assessing Officer never tried to 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 26 point out the source of investments otherwise than as claimed by the Assessee and which allegedly considered as unexplained without reverting to the source explained, accepted and supported by the documents relating to the Assessee. As such, there is no doubt about the source of the investments as explained by the Assessee in its statement recorded during the course of survey on 05.09.2018. If the source of investments from income of business transactions has been found satisfactory as was explained and stated at the time of survey, particularly when no question was ever raised by the department about the source of investment, then the question of treating the same as an unexplained investment is totally unwarranted. The section invoked in the assessment or considering the same as deemed investment under section 69, is an action having no substance and without any basis or rationale on the part of the Assessing Officer. Even this contention of the Assessee is further strengthened from the fact that the income which was declared by the Assessee during the survey and was accepted by the department as it is, no other source of income was ever confronted by the department at the time of survey, even thereafter. Further declaration of the surrendered income in the return and accepting the 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 27 statement of the Assessee given at the time of survey, was not found to be incorrect particularly with respect to the source of the said income than there is no reasons to consider the same income as unexplained / uncounted investment in view of the provisions of section 69 of the Act. 7.6 Therefore, in the absence of the any adverse findings by the Assessing Officer on the source of earning of the Assessee in respect of the income declared in the return, treating the same as unexplained investment is uncalled for. The AO was unreasonable and unjustified in rejecting the explanation put forth by the Assessee and the assessment framed is a clearly an example of preset mind of the Assessing Officer. Thus, in the circumstances, the provisions of section 69 of the Act as invoked while framing assessment by the Assessing Officer was unjustified and the action of the Assessing Officer deserves to be negated. 7.7 The Assessee has relied upon the Judgement of the Hon'ble I TAT, Delhi Bench in the case of ‘M/s Agson Global Private Limited Vs. The Assistant Commissioner of Income Tax’, Central Circle-28, Delhi in ITA no. 3741 to 3746/Del/2019, wherein it has been held by the Bench that 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 28 the income which is a part of profit and loss account, cannot be treated as an unexplained cash credits u/s 68 of the Act. 7.8 Reliance can also be placed on the Judgement of the ITAT, Chandigarh Bench in case of ‘Shri Harish Sharma Vs. The Income Tax Officer, Ward 5, Khanna’, Distt. Ludhiana in ITA No. 327/Chd/2020, wherein it was held that: "Find 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 treated the amount in question as undisclosed income u/s 68 of the Act and computed the Tax liability under the provisions of the section 115BBE of the Act." 7.9 As regards the charging of income tax @ 60% invoking the provisions of section 115BBE on the income declared by the Assessee in its return of income. The Assessee has already made its detailed submissions with respect to the invocation of the provisions of section 69 above. In case the Bench is also of the view that the action of the Assessing Officer in invoking the provisions of section 69 of the Act is not warranted then this ground will consequently become inoperative as the charging of income at a higher rate does 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 29 not arise when an income is a part of normal business income and the normal rate of tax is applicable. 7.10 It is more of strangulation situation as far as the Assessee is concerned in case he has been charged to tax as per the provisions of section 115 BBE. Further the provisions of section 69 of the Act apply to unexplained investments and not sum already offered to tax as income by the Assessee in the return of income at the maximum marginal rate. The objective behind the introduction of the section 115BBE was only to curb the practice of laundering of unaccounted money. 7.11 Based on the above, it is requested that the tax on the additional income already declared in Profit and Loss account of the Assessee be kindly treated as business income taxed accordingly and not as per the provisions of Section 115BBE of the Act. 7.12 It is submitted that the Learned AO gravely erred in disallowing depreciation claimed at Rs. 2,50,000/- by holding that the same cannot be allowed against alleged unexplained investment offered as additional income during the course of survey u/s 133A. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 30 7.13 The Assessee has claimed deduction of an amount of Rs. 2,50,000/- on account of deprecation from the returned income in its P&L account. But the AO by applying the provisions of section 115BBE (2) of the Act, disallowed such deprecation claimed and make the disallowance of Rs. 2,50,000 in the returned income. 7.14 The contention of the Assessee is that when the income / investment is already surrendered during the survey and also offered for taxes while filing return of income, the same cannot be treated as unexplained investment. Therefore, if an investment is not unexplained than the expenditure claimed in relation to that investment cannot be disallowed. 8. It was submitted that the Assessee had offered sum total of these transactions as business income for taxation in addition to the normal business income at the conclusion of the survey operation vide his letter dated 5.9.2018 which is available in the Assessee's Paper Book. It was submitted that the said sum of Rs. 90 lacs was offered for tax as additional business income at normal rate applicable for the period under reference and which was accepted by the Revenue authorities at the relevant point in time. It was submitted that the Revenue authorities who had conducted 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 31 the survey were satisfied about the source of the said transactions which had been carried on by the Assessee under the name and style of M/s Supreme Petro Foam Industry, Khanna and no questions or objections were raised during the course of survey proceedings and therefore, the onus cast on the Assessee was duly discharged. It was submitted that the AO has not been able to controvert the aforesaid submissions which were also made during the course of assessment proceedings. It was further submitted that the books of account were maintained in the normal course of the Assessee's business which were duly audited and in the Tax Audit Report, the auditors have also mentioned that there is no change in the nature of the business so carried on by the Assessee as compared to earlier years. It was submitted that the additional income so offered was duly recorded in the books of account and on the basis thereof, was offered to tax by the Assessee while filing his return of income. It was submitted that during the course of assessment proceedings, the submissions were filed from time to time which were duly accepted by the A.O., and, wherein it was submitted that none of the income offered for taxation at the conclusion of survey proceedings was in the nature of deemed income and therefore, the 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 32 deeming provisions as well as provisions of Section 115BBE were not applicable. It was submitted that the AO, however, brought these transactions amounting to Rs. 90 lacs to tax u/s 115BBE of the Act merely for the reason that such income had been offered for taxation during the course of survey proceedings and thereafter, the said findings have since been confirmed by the ld. CIT(A). In view of the above, it was submitted that it is evident from the records that during the course of survey of the business premises, no other source of income except business being carried on in the name and style of M/s Supreme Petro Foam Industry, Khanna was detected and evidently, the source of additional income offered for taxation was found to be from the said business only as duly corroborated by the statement of the Assessee recorded by the Revenue Authorities at the conclusion of the survey proceedings. 9. It was submitted that the additional income so surrendered was offered for taxation at the rates applicable at the relevant point in time and which has also been accepted by the authorities while accepting the surrender letter. It was submitted that the AO has not denied this fact and has rather accepted that the discrepancies 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 33 found/detected during the survey operations pertain to the business which is being carried on by the Assessee. It was further submitted that Section 115BBE is a machinery provision enabling the AO to levy tax as per the specified tax rate, provided the income is assessable as deemed income under the deeming provisions. It was submitted that, however, in the instant case, the deeming provisions are clearly not attracted as the source of the income has been duly explained by the Assessee during the course of survey proceedings. It was, accordingly, submitted that unless and until the deeming provisions are attracted, Section 115BBE cannot be invoked in the instant case. It was submitted that Section 115BBE is only a machinery provision specifying a special tax rate for bringing deemed income as specified in Section 69, 69A to tax and not for bringing each and every income merely for the reason that the same has been disclosed during the course of survey of the business premises of the Assessee. 9.1 It was further submitted that the AO has referred to the decision of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. Vs CIT. However, the said case is clearly distinguishable on facts in the present case. It 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 34 was submitted that the said decision has been considered in various Co-ordinate Chandigarh Bench decisions such as Famina Knit Fabs Vs ACIT 176 ITD 246, Gaurish Steels Pvt. Ltd. Vs ACIT 43 ITR (Trib) 414 and Marshal Machines Pvt. Ltd. (ITA No. 57/CHD/2017). It was submitted that in the said decisions, the Co-ordinate Chandigarh Benches have adequately discussed the judgement of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. as well as Gujarat High Court in case of Fakir Mohmed Haji Hasan Vs CIT. 10. Further reliance was placed on the Co-ordinate Jaipur Benches decision in case of DCIT Vs. Shri Ram Narayan Birla (ITA No. 482/JP/2015 dt. 30/09/2016), and Bajargan Traders Vs. ACIT (in ITA No. 137/JP/2017 dt. 17/03/2017) which has subsequently been affirmed by the Hon'ble Rajasthan High Court in case of PCIT vs Bajrang Traders (ITA No.258 of 2017). Further, reliance was placed on Coordinate Ahmedabad Benches decision in case of Chokshi Hiralal Maganlal Vs. DCIT [2011] 45 SOT 349 (Ahmedabad) and Chandigarh Benches decision in case of M/s Sham Jewellers Vs. The DCIT (in ITA No. 375/Chd/2022). 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 35 11. It was, accordingly, submitted that in light of the aforesaid submissions, the amounts so surrendered during the course of survey proceedings is clearly in the nature of business income and it has been duly offered to tax under the head "income from business & profession”. Therefore, the action of the AO in treating the business income so offered by the Assessee as deemed income u/s 69 and 69A and bringing the same to tax under the amended section 115BBE deserve to be set aside and necessary relief be provided to the Assessee. 12. Per contra, the ld. DR has relied on “Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central)’, 126 ITR 49 (Del.) wherein, it has been held that expenditure not accounted for can be estimated and treated as income from undisclosed sources; that correctness of estimate is question of fact and degree; that absence of direct evidence does not preclude assessment by inference and estimate; that it is duty of the ITO to make exhaustive enquires and gather some material as the basis of the estimate; that the estimate without details may not be accepted; that where the expenditure on marriage of the Assessee was understated, the ITO estimated the expenditure and treated the same as 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 36 from undisclosed sources, the joint family had been spending monies for the marriage, it was held that it was more probable that estimated income belongs to HUF and that the Assessee was entitled to the benefit of doubt. 13. We have heard the rival contentions and pursued 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. 90 lacs, thereafter the return of income filed by the Assessee on 17.12.2019 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 37 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 38 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 39 recorded in the books of accounts so maintained by the Assessee, and the Assessee offers no explanation 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 Bench 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 40 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 41 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 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 42 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. We find that through various questions raised during the course of survey, the Assessee has been asked about the nature and source of its income and various discrepancies so found during the course of survey. The statement of the partner of the Assessee firm Shri Baljinder Kumar was recorded wherein he stated that he is a partner alongwith his wife in M/s Supreme Petro Foam Industry, Ludhiana, a 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 43 partnership firm engaged in manufacture of foam products and sole proprietor in M/s Shivam Coir Foam Products, which is selling foam products on wholesale and retail basis and besides that, they have no other source of income / interest in any other business concern. There were certain discrepancies noticed in respect of M/s Supreme Petro Foam Industry wherein the Assessee surrendered a sum of Rs. 90 lacs in terms of discrepancy in stock and construction expenses. The same was subsequently reiterated in the surrender letter dated 5.9.2018, wherein the Assessee has stated that it offers’ the additional income for current financial year at normal rate of tax as the said income has been earned by it out of its business transactions in the current year. We, therefore, find that it is a case where there was discrepancy in stock and construction expenses and the difference in stock so found by the authorities does not have independent identity and is part and parcel of entire stock. 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 thus it cannot be said that these are unexplained 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 44 transactions calling for invocation of deeming provisions. 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 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 its return of income and paid due taxes thereon. 19. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 45 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. 20. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 46 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 cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law.” 21. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 47 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 48 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 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 49 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. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 50 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. 22. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 51 difference should thus be treated as undeclared business income. 23. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 52 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.” 24. Thereafter, the Coordinate Jaipur Benches in case of Bajargan Traders Vs. ACIT (Supra) has similarly held as under: 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 53 “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. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 54 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.” 25. 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). 26. 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 an amount of Rs.70 lacs as additional income during 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 55 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 56 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 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.” 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 57 27. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 58 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 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 59 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. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 60 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 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.” 28. 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”. 29. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 61 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. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 62 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 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 63 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 in 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 64 upholding of the application of provisions of section 115BBE of the Act. Accordingly, ground Nos. 8 and 9 are also allowed.” 30. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 65 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 year is not allowed to be setoff 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 66 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 67 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.” 31. 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 68 upheld by the Hon’ble High Court. Unlike the said case, in the instant case, as we have noted above. 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. 32. As to how the judgement of Delhi High Court in the case of “Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central)’, (supra) is at all applicable, does not stand made out. If at all, it helps the Assessee rather than the Department in as much as, it holds that it is the duty of the ITO to make exhaustive enquiries to gather some material as the basis of the estimation. In the present case, On the other hand, the proposition is that since the Assessee had explained the surrendered income to be from its business, the onus to prove otherwise shifted on to the A.O., as discussed herein above. 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 69 33. We have taken a similar view in the case of Shri Baljinder Kumar, who is the partner in the Assessee firm in ITA No. 38/Chd/2023 dated 2.8.2023 wherein the relevant findings read as under: “16. In the instant case, we 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 discrepancies so found during the course of survey. In response, the assessee has stated that he is a partner along with his wife in M/s Supreme Petro Foam Industry, a partnership firm engaged in manufacturing of Foam products and sole proprietor in M/s Shivam Coir Foam Products which is selling Foam products on wholesale and retail basis, and besides that, they have no other source of income/interest in any other business/concern. There were certain discrepancies noticed in respect of M/s Supreme Petro Foam Industry wherein the assessee surrendered a sum of Rs 90 lacs in terms of discrepancy in stock and construction expenses. Further, in respect of M/s Shivam Coir Foam Products, the assessee was asked about the hand- written particulars in terms of certain names and amounts recorded in a diary found during the course of survey and in response, the assessee has submitted that these entries pertain to his proprietorship concern M/s Shivam Coir Foam products, Khanna. It was further stated that these entries are advances/receivables from various persons in respect of his business dealings and were recorded for the purpose of memory. It was further stated that to buy piece of mind, he offers a sum of Rs 15 lacs as additional income for the current financial year subject to no penal action. The same was subsequently reiterated in the 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 70 surrender letter dated 5/09/2018 wherein the assessee has stated that he offers the additional income for current financial year at normal rate of tax as the said income has been earned by him out of business transactions in the current year. We therefore find that it is a case where there are unrecorded sales made by the assessee during the current financial year and receivables arising out of such unrecorded sales have been offered to tax as additional business income by the assessee. The source of such unrecorded receivables is thus the unrecorded sales which have been explained by the assessee and thus, the necessary nexus with the business of the assessee has been established. The name of the person, the amount receivables, date, etc has been duly recorded in the diary, thus, the statement of the assessee duly stand corroborated by the contents of the diary so found during the course of survey. No doubts, 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, 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 of the Act.” 34. In the light of the aforesaid discussion and in the entirety of the facts and circumstances of the case and following the decisions supra, the income of Rs 90,00,000/- 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 40-Chd-2023– M/s Supreme Petro Foam Industry, Ludhiana 71 the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration. 35. In the result, the appeal of the Assessee is allowed. Order pronounced in the Open Court on 11.10.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President Dated : 11.10.2023 “आर.के.” आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आय ु Èत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar