AI Insights
The case involves two appeals by Shri Ved Parkash and Shri Durga Dass Surender Kumar against the orders of the Pr. CIT, Rohtak, which were passed under section 263 of the Income Tax Act, 1961. These orders pertained to the assessment year 2017-18 and were based on a survey conducted under section 133A at the business premises of the assessees. During the survey, discrepancies were noted, leading to the assessees surrendering additional income. The original assessments accepted this surrendered income as business income, taxed at normal rates. However, the Pr. CIT later revised these assessments, suggesting that the income should be taxed under section 115BBE, which applies a higher tax rate to certain undisclosed incomes. The Tribunal found that the Assessing Officer had conducted a thorough examination and inquiry, and the income was rightly assessed as business income.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 127774 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-05-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
15-02-2023
Assessment Year
2017-2018
Appeal Filed On
01-05-2022
Judgement Text
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 401/Chd/ 2022 नधा रण वष / Assessment Year : 2017-18 Shri Ved Parkash Shop No. 7, M/s Garg Trading Co. Anaj Mandi, Ramthali, Kaithal- 136027, Haryana बनाम The Pr. CIT Rohtak थायी लेखा सं./PAN NO: AIVPP5661M अपीलाथ /Appellant यथ /Respondent आयकर अपील सं./ ITA NO. 397/Chd/ 2022 नधा रण वष / Assessment Year : 2017-18 Shri Durga Dass Surender Kumar Shop No. 102-A, Anaj Mandi, Cheeka Kaithal 138034, Haryana बनाम The Pr. CIT Rohtak थायी लेखा सं./PAN NO: AAJFD6380K अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Sudhir Sehgal, C.A राज व क! ओर से/ Revenue by : Shri Sarabjeet Singh, CIT, DR स ु नवाई क! तार&ख/Date of Hearing : 16/02/2023 उदघोषणा क! तार&ख/Date of Pronouncement : 12/05/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are two appeals filed by the respective assessees against the order of Ld. Pr. CIT, Rohtak passed u/s 263 dt. 14/03/2022 & 17/03/2022 respectively pertaining to Assessment Year 2017-18. 2. Since common issues are involved, both these appeals were heard together and are being disposed off by this consolidated order. 3. In ITA No. 401/Chd/2022, the assessee has taken the following grounds of appeal: 2 1. That the Ld. PCIT (Central), Ludhiana has erred in assuming the jurisdiction to issue notice u/s 263 of the Income Tax Act, 1961 and, thereby, setting aside the order as passed after due application of mind by the Assessing Officer. 2. That the Ld. PCIT has failed to appreciate the fact that the original assessment was framed by the Assessing Officer after due application of mind and on that basis and after consideration of all the facts and circumstances of the case, has charged to tax the income offered during the course of survey to the tune of Rs.90 lacs at the normal rate of tax since the same was derived out of business income of the assessee and during survey, no other source of Income having been noticed, the assumption of jurisdiction by the PCIT is bad in law. 3. That the Ld. PCIT has failed to appreciate that the assessment had been completed after due consideration of various replies by the Assessing Officer during the course of assessment proceedings and the Assessing Officer having taken a possible view and, therefore, the assumption of jurisdiction u/s 263 was not called for by the Ld. PCIT. 4. That the Ld. PCIT had failed to appreciate that at the time of survey, it was clearly stated that the nature of Income offered during survey was business Income and the same was disclosed in the profit and loss account and even the advance tax/self assessment tax has been deposited as per normal rate of taxes, which proves that the Assessing Officer at the time of survey and lateron was of the view to tax the same at normal rate of tax and, thus, invoking of provisions of section 115BBE is out of context. 5. Notwithstanding the above said ground of appeal, the Ld. PCIT has erred in assuming the jurisdiction u/s 263 on the basis of audit objections, which is apparently wrong and incorrect in view of the judgment of Jurisdictional High Court in the case of Sohana Woollen Mill and other judgments of jurisdictional ITAT, Chandigarh Bench, Chandigarh in the case of M/s Ganga Acrowools Ltd. in ITA No.196/Chd/2021 and in the case of Sh. Surinder Pal Singh in ITA No. 576/Chd/2021 vide orders, dated 31.01.2022 and also that 263 proceedings have been initiated at the best of proposal sent by the Assessing Officer/Addl.CIT and, thus, the proceedings are void abinitio. 6. The appellant craves leave to add, amend, alter any of the above grounds during the appellate proceedings have been considered.” 4. Briefly the facts of the case are that a survey operation under section 133A was carried out at the business premises of the assessee on 03/05/2016. During the course of survey operation, certain discrepancies were noticed which could not be explained by the assessee and as a result, the assessee voluntarily offered an additional income of Rs. 90,00,000/- apart from his normal business income. Subsequently, the assessee filed his return of income showing total income of Rs. 96,06,069/- including the surrendered income of Rs. 3 90,00,000/-. The case of the assessee was taken up under compulsory scrutiny and notice under section 143(2) and 142(1) were issued alongwith detailed questionnaire. After taking into consideration the submissions of the assessee, the returned income was accepted by the AO and assessment order dt. 24/12/2019 was passed under section 143(3) of the Act. 5. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause under section 263 dt. 09/02/2022 was issued and thereafter, after taking into consideration the submissions so filed by the assessee but not founding the same acceptable, the assessment order passed under section 143(3) was held to be erroneous in so far as prejudicial to the interest of the Revenue for the reason that the AO has passed the assessment order in a very casual manner without due diligence and without conducting proper inquiry and taking cognizance of amended Finance Act, 2016 in respect of surrendered income and the matter was set aside to the file of the AO to pass a fresh order in accordance with law, keeping in view the observation made in the impugned order and after providing reasonable opportunity to the assessee. 6. Against the said findings and direction of the Ld. Pr. CIT, the assessee is in appeal before us. 7. During the course of hearing, the Ld. AR submitted that the assessee, an individual, is carrying on the business of general commission Agent and has been regularly filing his return of income for past many years. For the impugned assessment year, the assessee filed his return of income declaring total income of Rs. 95,69,780/- under the head “ Income from Profit and Gains from Business or Profession”. It was submitted that the assessee maintains a complete set of books of account which are duly audited by a Chartered Accountant and based on the audited books of accounts, the return of income was prepared and filed by the assessee with the Revenue authorities. 4 8. It was further submitted that during the course of survey proceedings, the assessee surrendered a sum of Rs. 90,00,000/- in terms of his surrender letter dt. 03/05/2016. The said surrender was on account of cash of Rs. 9,80,000/- and advances given to the farmers amounting to Rs. 80,20,000/-. It was submitted that the said amount of Rs. 90,00,000/- was credited in the P&L Account as normal business income and thereafter the return of income was filed based on such audited books of account and the tax has been paid at normal rate of tax amounting to Rs. 32,44,935/-. 9. It was submitted that vide questionnaire dt. 09/12/2019, the AO specifically raised the queries with respect to amount surrendered during the course of survey and specific reference was made to the applicability of Section 115BBE of the Act. In response, the assessee filed his submission dt. 23/12/2019 wherein it was submitted that the provisions of Section 115BBE are not applicable as the amount has been shown in the P&L Account for the year ended 31/03/2017 and the Department during the survey action neither doubted the business operation of the assessee nor given any adverse findings for any other source of income. Reference was also drawn to the statement of the assessee recorded during the course of survey operation wherein it was stated that the income is only on account of his business dealings. Thereafter, after taking into consideration the submissions filed by the assessee and after due application of mind, the assessment proceedings were concluded by the AO wherein he accepted the returned income and no additions were made. 10. In the above factual background, it was submitted by the ld AR that the AO took a possible view on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of the business income of the assessee and accordingly the revision proceedings have been initiated merely basis difference of opinion which cannot be a ground to determine as to whether the order passed by the AO is erroneous and prejudicial to the interest 5 of the Revenue. It was accordingly submitted that the action of the Ld. Pr. CIT is bad in law as the AO after due application of mind during the course of assessment proceedings took a possible view which may be different from the view of the Ld. Pr. CIT and has accepted the additional income surrendered as business income of the assessee. 11. It was further submitted that the Ld. Pr. CIT has erred in invoking the Explanation 2 to Section 263 as the case of the assessee does not fall in any of the limb of the said explanation. It was submitted that the AO made independent inquiry on the issue concerned and there is no lack of inquiry as specific inquiry was made by the AO on the concerned issue and in depth reply was also filed. It was accordingly submitted that even after the thorough application of mind by the AO, merely because it seems to the Ld. CIT that issue had remained unattended by the AO, he cannot call for application of section 263 by treating the order passed by the AO as erroneous and prejudicial to the interest of the Revenue. 12. It was further submitted that the AO was fully conscious of the provisions of Section 115BBE and he has taken a possible view of taxing the surrendered income at normal rate of tax. 13. It was further submitted that the assessee has duly disclosed the amount of surrendered income in the P&L Account which have been duly audited. It was submitted that the surrender amount is only on account of business of the assessee and the same fact has been specifically mentioned in the surrender letter dt. 03/05/2016 which has been accepted by the Department during the survey proceedings as well as during the assessment proceedings wherein no adverse remark has been passed with respect to the business of the assessee or any other source of the income other than the business so carried on by the assessee. It was accordingly submitted that the amount surrendered pertains only to the business of the assessee and in view of the said explanation which 6 has been found reasonable and acceptable to the AO, the latter has rightly not invoked the deeming provisions along with provisions of Section 115BBE of the Act. 14. It was further submitted that the facts of the case of the assessee are wholly similar to the case of Shri Surender Kumar. It was submitted that the survey on the assessee was a linked survey wherein, alongwith Shri Surender Kumar, the department conducted survey on Shri Durga Dass Surender Kumar (Partnership firm of Shri Surender Kumar) and the assessee’s firm namely M/s Garg Trading Company as the assessee is also a related party to Shri Surender Kumar being members of the same family. It was submitted that the case of Shri Surender Kumar has already been decided by the Coordinate Chandigarh Bench in ITA No. 398/Chd/2022 dt. 30/12/2022 wherein the appeal filed by Shri Surender Kumar against the order of the Ld. Pr. CIT under section 263 has been allowed. 15. It was further submitted that the case of the assessee is also covered in the case of Surya Hatchery wherein the Coordinate Chandigarh Bench in ITA No. 317-318/Chd/2022 dt. 07/12/2022 has decided the matter in favour of the assessee. 16. It was accordingly, submitted that in light of the aforesaid submissions and given the fact that the case of the assessee is squarely covered by the decision of Coordinate Chandigarh Benches in case of Shri Surender Kumar and Surya Hatchery, the order passed by the Ld. Pr. CIT under section 263 may be set aside. 17. Per contra, the Ld. CIT DR supported the order and the findings of the Ld. Pr. CIT. It was submitted that during the course of survey, the assessee had surrendered an amount of Rs. 90,00,000/- which is in the nature of unexplained cash and unexplained advances given to the farmers which were found as on the date of survey and not accounted for in the books of accounts. It was 7 submitted that assessee in his return of income has shown the surrendered income as business income and has paid taxes as per normal slab rate. It was submitted that during the course of assessment proceedings, the assessee failed to submit any explanation for showing the surrendered income as normal business income. It was submitted that the amount so surrendered represent the undisclosed income of the assessee which would have never come to light had there been no survey action under section 133A of the Act and the same could not be treated as normal business income and have to be considered as unexplained income under section 68 - 69C of the Act and the tax rate at the rate of 60% should have been applied as per the provisions of Section 115BBE of the Act in terms of amendment to Section 115BBE by taxation laws 2 nd Amendment Act, 2016. It was accordingly submitted that in this case, the AO should have considered the amount so surrendered as unexplained income under section 68 to 69C and the tax should have been levied @60% under section 115BBE of the Act. It was further submitted that this was the only possible view in the facts and circumstances of the present case wherein the provision of Section 115BBE are applicable on surrendered income after taking cognizance of prevalent provisions of law and the contention of the ld AR that the AO has taken a possible view cannot be accepted. It was accordingly submitted that there is no infirmity in the order of the Ld. Pr. CIT wherein the order so passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue. 18. We have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to nature and source of income surrendered by the assessee during the course of survey and the reasonability of the explanation so offered by the assessee. In this regard, we find that survey operations u/s 133A were conducted at the business premises of the assessee who is sole proprietor of M/s Garg Trading Company on 03/05/2016 8 and his statement was recorded and the relevant contents thereof read as under: +न: आपने अपनी लेखा प ु तकारोकड़ के अन ु सार .. 9325/- cash in hand /दखाया है, जब2क वा तव म3 आपक! द ु कान म3 .. 9,89,325/- cosh मौज ू द पाया गया है। क ृ पया इस excess पाये गये कै श .. 9,80,325/- का ;ोत बताएँ। उ तरः म?ने अपनी लेखा प ु तक@ के अन ु सार cash-in-hand Aबना अपने Accountant के Bात कर Cलया है इसCलये इसम3 गल तय@ क! संभावना हो सकती है। मेर& द ु कान म3 मौज ू द यह सारा cash हमार& फम के Fयापार से ह& पैदा ह ु आ casH है। म? इसके बारे म3 सह&-सह& Hोत अभी नह&ं बता सकता ह ू ं, ले2कन इस आधार पर मै इस अIधक cash .. 9,80,000/- क! अ त रJत आय अपनी फम क! नधा रण वष 2017-18 2क Kववरणी म3 ेCशत करने का वचन देता ह ू ँ । +नः सव M के दौरान आज आपक! द ु कान म3 एक छोट& पॉके ट नोटब ु क (डायर&) Cमल& है िजसे धारा 133A (3) (a) के अधीन कUजे म3 ले Cलया गया है। इस नोट ब ु क म3 क ु छ FयिJतय@ के नाम Cलखे ह ु ए ह? तथा उन नामो के सामने क ु छ रकमेव तIथया Cलखी ह ु ई है। क ृ पा इस नोट ब ु क म3 Cलखी गई इन Entries क! क ृ त तथा उVे+य बताय3। उ तरः हमारे आदत के कारोबार म3 जमींदार@ को हमार& द ु कान पर फसल क! उपज AबW! हेत ु लाने के Cलये े रत करने के Cलए समय समय पर Advance रकम3 देनी पड़ती है। इस Note Book म3 Cलखी गई Entries ऐसी ह& Advances का Kववरण है। यह Advance हमार& नयCमत लेखा प ु तक@ म3 दज नह&ं है। म? यह वचन देता ह ू ँ क! इन Advance क! सकल रकमो को अपनी फम 2क नधा रण वष 2017-18 क! आयकर Kववरणी म3 नयCमत लेखा प ु तक@ के अन ु सार Bात होने वाल& आय के अ त रJत घोKषत कर द ू ँ गा। म?ने इस नोट ब ु क म3 Cलखी ये सभी Advances क! Entries देख ल& है इनका क ु ल योग ..80,20,000/- .पये बनता है। 19. In this regard, we further refer to the surrender letter dated 03/05/2016 submitted by the assessee company before JCIT, Kurukshetra Range and contents thereof read as under: To, The Joint Commissioner of Income-Tax, Kurukshetra Range, Kurukshetra, Sub: Survey u/s 133 A of the Income Tax Act 1961 conducted at the business premises of Ved Parkash S/o Sh. Des Raj Prop. Garg Trading Co. Vill. Ramthali Respected Madam, Kindly refer to the subject cited above: 9 In this connection it is submitted that a survey was conducted on the business premises of above mentioned assessee today i.e on 03.05.2016 and following discrepancies were found during the course of survey: i) Excess cash found of Rs. 9,80,000.00. ii) Advance given to farmers recorded in a packet note book for the period 01.04.2016 to 31.03.2017 amounting to Rs. 80,20,000.00, but not accounted for in the books of accounts. I am not able to explain the above discrepancies at that time. To buy peace. I hereby surrender an amount of Rs. 90,00,000.00 (ninety lacs) as additional income for the Asstt. Year 2017-18 subject no penal action and prosecution. Thanking you, Yours Faithfully, Sd/- Date: 03.05.2016 Ved Parkash Prop. Garg Trading Co. 20. The nature of surrendered income was therefore excess cash of Rs 9.80 lacs and advance given to farmers recorded in the pocket diary for the period 1/04/2016 to 31/03/2017 amounting to Rs 80.20 lacs not accounted for in the books of account. The factum thereof has been accepted by the Survey team lead by JCIT and thereafter by the Assessing officer during the course of assessment proceedings after due examination. The Assessing officer during the course of assessment proceedings has issued a specific show-cause dated 5/11/2019 and has referred to the survey proceedings and stated that during the course of survey operation carried out at your business premises on 3/05/2016, a diary containing entries of advances made to various persons was impounded and you are requested to explain the entries contained in the said diary. In response, the assessee submitted that the advances were made to some farmers against their agriculture produce to be sold at our shop in future but the amounts of said advances were not recorded in the books of accounts but recorded in the diary. It was further submitted that total amount of unrecorded advances were surrendered and additional income to that extent was offered for taxation. Thereafter, the Assessing officer issued another show- 10 cause dated 9/12/2019 asking the assessee to show-cause why the amount surrendered during the course of survey may not be taxed separately at the maximum tax rate in view of the provisions of section 115BBE of the Act and in response, the assessee submitted that the provisions of section 115BBE are not applicable as the additional income is related to his business of commission agency and the contents of the submissions of the assessee read as under: During the survey operations we had surrendered amount of Rs. 90.00 Lakhs as additional income for the Asstt. Year 2017-18 in the accounts of advance to farmers at Rs. 80,20,000.00 and excess cash of Rs. 9,80,000.00. Regarding applicability of Section 1158BE. it is submitted that we have declared the amount as business income in the return of income filed for the year, the amount has been shown in profit and loss account, the advances to farmers are related to our business of 'Commission-Agency. The additional income of Rs. 90.00 lakhs has been earned from the business of commission agency as I am not having any other source of income other than the income from business of commission agency. Section 115BBE is applicable only where the assessee is not able to explain the source of income. In our case the source of income was duly explained at the time of survey operations as the income from business of commission agency. The survey team was fully satisfied with our version. Section 115BBE was originally introduced by Finance Act 2012 w.e.f. 01.04.2013. Section 115BBE as enacted then is reproduced as under:- "115BBE. Tax on income referred to in section 68 or section 69 or section 69A or section 698 or section 69C or section 69D.-(1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A. section 698, section 69C or section 69D, the income-tax payable shall be the aggregate of- (a) amount of income-tax calculated on income referred to in section 68, section 69. section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub- section (1)." From the above definition it is clear that Section 115BBE is applicable on the incomes which are not covered under any other heads of income but covered under the head Income from other sources. Section 115BBE refers to the income related to Section 68. section 69, section 69A, section 698, section 69C or section 11 69D, which are covered by the head 'Income from Other Sources' and thus not applicable on the income which is covered by the head 'Business Income. Since our additional income is related to business, earned from the business of commission agency, shown in profit and loss account as business income,declared in the return under the head of "BUSINESS INCOME, so can't be considered as income from other sources and hence not liable to be taxed under the provisions of Section 115BBE. Moreover after considering all the facts related to my income and source of amount the survey team assured us to apply normal rate of tax on the additional income and accordingly whole of the tax was paid before filing of return. To apply provisions of Section 115BBE and charge tax at higher rate now would be against the 'Natural Justice'. 21. And the AO, thereafter, after taking into account the findings of the survey team and his own independent examination, accepted the nature and source of surrendered income as arising out of assessee’s business operations subject to normal taxation as against taxation under the deeming provisions read with section 115BBE of the Act. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy 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. Apparently, the ld PCIT has failed to take into consideration these documents and findings of the survey team which are very much part of the records available at the time of examination by him. Following the surrender so made during the course of survey, the assessee has honored the surrender so made and offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessment order that assessee has voluntarily surrendered Rs 90 lacs over and above the normal business income in his return of income and has accordingly not drawn any adverse inference in this regard. 22. We therefore find that the Assessing officer has duly taken cognizance of the findings of the survey team, the documents found during the course of 12 survey, the statement of the assessee recorded during the course of survey, the surrender letter and the return of income, and explanation of the assessee against the specific show-cause notices during the course of assessment proceedings and after examination thereof and due application of mind, income has been rightly assessed under the head “business income”. In light of the same, we are of the considered view that the order so passed by the Assessing officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer after due appreciation of facts and circumstances of the case, assessed the income under the head “business income” and didn’t invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. 23. The ld PCIT has held that the moment any income representing any excess stock/investment/receivables/cash/bullion etc is found during survey/search and not recorded at that point in time in books of accounts, the same being in nature of deemed income as mentioned u/s 68/69/69A/69B/69C etc, the provisions of section 115BBE are attracted. In our view, what is relevant before invoking the deeming provisions is not just the factum of survey/search 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/search 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 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 13 found satisfactory, he can proceed and invoke the deeming provisions. In case of Gandhi Ram (ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was similarly held that it is like laying a general rule which is beyond the mandate of law that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted and the relevant findings read as under: 5. “Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which to our mind is beyond the mandate of law, that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted. The ld PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case which is clearly absent in the instant case. Therefore, where the ld PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law.” 24. Similarly, in case of Surender Kumar & others (Supra), the Coordinate Chandigarh Benches has held that the aforesaid deeming provisions are attracted where the assessee fails to give the explanation regarding the nature and source of such undisclosed income. It has been further 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: 14 10. We have considered the rival contentions and have gone through the record. As per the provisions of Section 115BBE of the Act, the income tax on income referred to in Section 68 or Section 69 or Section 69A or Section 69B or Section 69C or Section 69D are chargeable to tax at a higher rate. Now a perusal of the provisions of Section 68, 69, 69A, 69B, 69C and 69D would reveal that those provisions are attracted in respect of the credits, cash, expenditure, investment etc. regarding which the assessee offers no explanation about the nature and source thereof. It is to be pointed out that the income is to be assessed u/s 68 wherein any sum is found credited in the books, of which the assessee offers no explanation about the ‘nature and source thereof’ or the explanation offered by him is not found satisfactory by the AO. Section 69 is attracted to the unexplained investments of which the assessee offers no explanation about the ‘nature and source’ thereof or the explanation is not found satisfactory. Similarly, Section 69A is attracted in case of money, bullion, jewellery or other valuable articles, Section 69B refers to the investments, Section 69C refers to the expenditure and Section 69D refers to the amount borrowed or repaid on hundi. The provisions of these Sections are attracted and the income is assessed under these Sections, if, the assessee fails to give the explanation about the ‘nature and source’ of such undisclosed income. The ld. PCIT in our view, in this case has confused himself between the ‘undisclosed income’ and the word ‘unexplained income’. As per provisions of Section 68 to 69D are attracted in respect of the undisclosed income but the condition for assessing such income under the said provisions is that the assessee has either failed to disclose the nature and source of such income or the AO does not get satisfied with the explanation offered by him. 15. The perusal of the above relevant part of the Audit Report proposal of the AO and Show Cause Notice issued by the ld. PCIT u/s 263 of the Act, would show that all the aforesaid authorities have been swayed by the notion that the income surrendered by the assessee was undisclosed income of the assessee and therefore, the same has to be assessed u/s 68 to 69D, as the case may be, of the Income Tax Act and thereby would be charged to higher rate of tax u/s 115BBE of the Act. However, as noted above, for an income to be taxed u/s 68 to 69D, as the case may be, it should not only be the undisclosed income but the essential condition is that the assessee has failed to disclose the ‘nature and source’ of such undisclosed income or that the explanation offered by the assessee is not found satisfactory by the AO. In the case in hand, as noted above, the 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 15 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. 25. As we have noted above, in the instant case, the ld. PCIT without taking into consideration the findings of the survey team, the documents found during the course of survey, the statement of the assessee company, the surrender letter and subsequent enquiry and examination conducted by the AO during the course of assessment proceedings has recorded a finding that the deeming provisions read with provisions of section 115BBE are applicable in the instant case. Where the ld PCIT dispute the nature of such surrender or the findings of department’s own survey team as well as that of the AO, he has to lead positive evidence to arrive at any contrary finding. Nothing has been brought on record in this regard. Therefore, the picture which is clearly emerging from the material available on record is the nature of surrender is excess cash arising out of his past business dealings and advance given to farmers against procurement of agriculture produce regularly dealt with by the assessee in normal course of its business and which have not been recorded in the books of accounts. Where the assessee has subsequently recorded the same in his books of accounts as part of business income, it cannot be said that the said action on part of the assessee is not in accordance with accepted accounting methodology and the nature of such income is other than business income. 26. In the instant case, as we have discussed above, it is evident that deeming provisions are not applicable in the instant case. Even for sake of argument, where such a view is taken on face value, it would be a case where a different point of view has been expressed by the ld PCIT though without any corroborative evidence, in any case, the same doesn’t lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the 16 source of such income and thereafter, has assessed the income under the head “business income”. The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of law. 27. Given that deeming provisions are not applicable in the instant case and consequently, normal tax rate are applicable and the tax rate as per section 115BBE, which is contingent on invocation of deeming provisions, doesn’t arise. Therefore, we need not go into the amendment in Section 115BBE wherein the tax rate has been increased which as per ld PCIT, the AO failed to apply. 28. In light of aforesaid discussions and in the facts and circumstances of the present case, where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature. In the result, the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained. 29. In ITA No. 397/Chd/2022, both parties fairly submitted that facts and circumstances of the case are similar as in ITA No. 401/Chd/222 except for the amount involved and similar contentions as advanced therein may be considered. In view of the same, our findings and directions contained in ITA No. 401/Chd/2022 shall apply mutatis mutandis to this matter and the order so passed by the Assessing officer cannot be held as erroneous in nature and the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained. 17 30. In the result, both the appeals filed by the respective assessees are allowed. Order pronounced in the open Court on 12/05/2023 Sd/- Sd/- आकाश द प जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 12/05/2023 आदेश क! तCलKप अYेKषत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु Jत/ CIT 4. आयकर आय ु Jत (अपील)/ The CIT(A) 5. Kवभागीय त नIध, आयकर अपील&य आIधकरण, च[डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar
Other Referred Cases
Sohana Woollen Mill vs. Jurisdictional ITAT, M/s Ganga Acrowools Ltd. vs. ITA No.196/Chd/2021, Sh. Surinder Pal Singh vs. ITA No. 576/Chd/2021, Surya Hatchery vs. ITA No. 317-318/Chd/2022, Gandhi Ram vs. ITA No. 121/CHD/2021
Laws Referred To
Income Tax Act, 1961
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