Sh. Bal Krishan , Moga V. Principal Commissioner of Income Tax (Central), Ludhiana

ITA 406/CHANDI/2021

AI Insights

The case involves three appeals by Shri Bal Krishan, Shri Kewal Krishan, and M/s Bindas Foods Pvt. Ltd. against the orders of the Pr. CIT(Central), Ludhiana, which were passed under section 263 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The appeals were consolidated due to their similar facts and legal issues. The primary contention was regarding the nature of income surrendered during a survey operation under section 133A, where the assessees argued that the income was business income and should be taxed at normal rates, while the Pr. CIT contended it should be taxed under section 115BBE at a higher rate. The Tribunal examined the submissions, the survey findings, and the assessments made by the Assessing Officer, ultimately deciding in favor of the assessees.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127589 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 13-12-2021
• Other Referred Cases: Gandhi Ram Vs. The Pr. CIT, Famina Knit Fab Vs. ACIT, Fakir Mohamad Haji Hasan Vs. CIT, Pr. CIT Vs. Khusi Ram & Sons Foods (P) Ltd., Kim Pharma Pvt. Ltd. Vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Revision of order; Loose papers; Deemed to accrue or arise in india; Prejudicial to interest
• Section: 68; 69; 263; 2; 69C; 143(3); 142(1); 133A; 69B; 143(2); 69A; 13; 153

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “ए” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी #व$म &संह यादव, लेखा सद+य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 406 /Chd/ 2021 Assessment Year : 2017-18 Shri Bal Krishan C/o Shankar Rice & General Mills, Mudki road, Baghapurana, Distt. Moga- Punjab The Pr. CIT(Central) ITO, Opp. BVM School, Kitchlu Nagar, Ludhiana, Punjab PAN NO: AERPK9771M Appellant Respondent ITA NO. 407 /Chd/ 2021 Assessment Year : 2017-18 Shri Kewal Krishan C/o Shankar Rice & General Mills, Mudki road, Baghapurana, Distt. Moga- Punjab The Pr. CIT(Central) ITO, Opp. BVM School, Kitchlu Nagar, Ludhiana, Punjab PAN NO: AKXPK4045J Appellant Respondent ITA NO. 409 /Chd/ 2021 Assessment Year : 2017-18 M/s Bindas Foods Pvt. Ltd. (Formerly known as M/s Shankar Agro Food), Mudki Road, Baghapurana, Distt: Moga, Punjab The Pr. CIT(Central) ITO, Opp. BVM School, Kitchlu Nagar, Ludhiana, Punjab PAN NO: ABFFS2952K Appellant Respondent ! " Assessee by : Shri Ashwani Kumar, CA and Shri Bhavesh Jindal, CA # ! " Revenue by : Shri Vivek Nangia, CIT, DR $ % ! & Date of Hearing : 19/01/2023 '()* ! & Date of Pronouncement : 16/03/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are three appeals filed by respective assessees against the separate orders of Ld. Pr. CIT(Central), Ludhiana each dt. 31/03/2021 passed u/s 263 of the Act pertaining to Assessment Year 2017-18. 2 2. All these appeals were heard together and are being disposed off by this consolidated order. 3. The Registry has pointed out that all the above appeals have been filed with a delay of 198 days beyond the prescribed period. In response, the aforesaid assessees have filed respective application seeking condonation of delay which is placed on record. During the course of hearing, the ld. AR reiterated the contents in the aforesaid applications and submitted that the delay occurred due to Covid-19 pandemic and it was requested that the delay may be condoned. The ld. Sr. DR didn’t controvert the aforesaid contention of the ld AR. After hearing both the parties and considering the material placed on record, the delay of 198 days in filing the present appeals by the aforesaid assessees is hereby condoned as we find that there was reasonable cause beyond the control of the assessee on account of Covid-19 pandemic and the appeals are hereby admitted for adjudication. ITA No. 409/Chd/2021 4. With the consent of the parties, the case of the assessee in ITA No. 409/Chd/2021 was taken as the lead case. In this appeal, the assessee has raised the following grounds of appeal: 1. “That the initiation of proceedings u/s 263 by the Learned Pr. CIT (Central), Ludhiana are against the facts and bad in law. 2. That the Learned Pr. CIT (Central), Ludhiana has erred in initiating the proceedings & in passing the order u/s 263 of the IT Act, 1961 and directing the AO to assess the surrendered income during survey of Rs. 2,02,00,000/- as unexplained income and tax the same under section 115BBE of the IT Act, 1961 and make fresh assessment. 3. That the Learned Pr. CIT (Central), Ludhiana has erred in finding that assessment already framed was erroneous & prejudicial to the interest of revenue as the assessment was framed by the AO after thorough investigation & proper application of mind. 4. That the worthy PCIT, Patiala has erred in applying Explanation 2 to section 263 inserted w.e.f 01.06.2015 as the concerned Assessing Officer had duly 3 made appropriate enquiries and applied his mind and assessed the income offered during survey as business income. 5. That in any case the order of the Learned Pr. CIT (Central) passed u/s 263 is against the law and deserves to be quashed.” 5. Briefly the facts of the case are that a survey operation under section 133A was conducted at the business premises of the assessee on 31/08/2016. During the course of survey proceedings, certain discrepancies were noticed and confronted to the assessee and the assessee offered a sum of Rs. 2,02,00,000/- as additional income over and above the normal income and in the return of income so filed by the assessee, the assessee has declared the said income as additional business income and tax thereon was calculated at normal rate. Subsequently, the assessment was completed under section 143(3) dt. 30/12/2018 at an assessed income of Rs. 1,99,81,908/- accepting the returned income so filed by the assessee and making an adjustment of Rs. 2,00,000/- to the returned income. 6. Thereafter, the assessment records were called for by the Ld. Pr. CIT(Central), Ludhiana and a show cause under section 263 dt. 26/03/2021 was issued and thereafter, after considering the submissions of the assessee, the assessment order passed by the AO was held as erroneous in so far as prejudicial to the interest of the Revenue and the same was set aside to be made afresh in accordance with the findings and the directions in the impugned order and which are under challenge before us. 7. During the course of hearing, the Ld. AR referred to the show cause under section 263 of the Act issued by the Ld. Pr. CIT(Central)and our reference was drawn to the para 3 to 6 of the show cause notice which read as under: “03. The records of the assessment proceedings have been examined. It is observed that the assessment in this case was completed and the tax was calculated at normal rates. The assessee has voluntarily declared an amount of Rs. 2,02,00,000/-as additional income over and above the normal income for the A.Y. 2017-18. The tax was calculated by the assessee at normal rate and 4 accordingly paid the taxes. However, in this case the assessee had declared undisclosed income and hence, this case falls under the ambit of section 68/69/69A/69B/69C of the IT Act, 1961, which is to be taxed u/s 115BBE of the Income Tax Act, 1961. 04. Section 115BBE of the Income Tax Act provides that where the total income of an assessee includes any income referred to in Section 68, Section 69. Section 69A, Section 69B, Section 69C or Section 69D (specified income) and such income is (a) reflected in the return of income furnished Section 139; or b) which is determined by the Assessing Officer. Then, income tax payable in respect of such income would be @60% u/s 115BBE. 05. In this case, the returned income includes an amount of Rs. 2,02,00,0007- being the undisclosed income, the tax applicability of the section 115BBE to be applied for the tax computation purpose whereas in the returned income, tax was calculated at normal rates. This had resulted in short levy of tax and interest. 06. In light of the above, it is evident that the assessment order passed on 30.12.2018 u/s 143(3) of the I.T. Act, 1961 is apparently considered erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the I.T. Act, 1961.” 8. It was submitted that as apparent from the show-cause notice, the Ld. Pr. CIT(Central) has held that since the returned income included the amount surrendered during the course of survey, the deeming provisions are applicable and the income tax payable has to be computed in terms of Section 115BBE of the Act. Further our reference was drawn to the para 2 of the impugned order wherein it has been stated by the Ld. Pr. CIT(Central) that the entire assessed income of Rs. 1,99,81,908/- included surrendered income of Rs. 2,02,00,000/- and during the course of assessment proceedings, the assessee has claimed that the surrendered income is nothing but unaccounted/unexplained stock in trade and unaccounted/unexplained receivables when the AO specifically asked why the provisions of Section 115BBE may not be invoked in its case. It was accordingly submitted by the Ld. AR that during the course of assessment proceedings, it is a matter of record that as far as the applicability of Section 115BBE is concerned, the matter has been duly examined by the AO. Further referring to the findings of the Ld. Pr. CIT(Central) wherein he has stated that the AO accepted the income of the assessee without verifying and examining the same and has taxed entire assessed income at normal rate, it was submitted 5 that the said findings is also factually incorrect and in this regard, our reference was drawn to the show cause notice issued by the AO during the course of assessment proceedings and the contents thereon reads as under: “Please refer to the proceedings pending in the case for the A.Y. 2017-18 as a consequence of survey conducted u/s 133A at your business premises i.e. M/s Shankar Agro Foods which has been taken over subsequently by M/s Bindas Foods Pvt. Ltd. During the course of those proceedings, stock inventory was prepared physically and compared with the books of account. Alongwith it was observed that in addition to the difference in the stock, there were certain loose documents / accounts in respect of certain parties representing the amounts receivables. All these issues were duly confronted to Sh. Kewal Krishan as per the statement recorded on 31.08.2016. Keeping in view the discrepancies in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below: Surrendered on account of difference in stock Rs. 1,02,98,582/- Surrendered on account of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 2. As per provision of section 115BBE, it has been provided as under: [(I) Where the total income of an assessee,- (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) Determined by the assessing officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), The income tax payable shall be the aggregate of- (i) The amount of income tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) The amount of income tax with which the assessee would have been chargeable has his total income been reduced by the amount of income referred to in clause (i)] And no deduction is allowable against this income as per provisions of sub section (2) of section 115BBE being the non obstante clause. 6 3. Thus the amount declared u/s 133A is liable to be assessed u/s 69 of the I.T. Act, 1961 and chargeable to tax u/s 115BBE introduced w.e.f. 0l.04.20l7 i.e. A.Y. 2017- 18 @ 60% thereof. Please show cause as to why the provisions of section 115BBE may not be applied for computing tax liability in the case as mentioned above. Your reply in the matter must reach the undersigned by 28.12.2018 at 3.00 PM. Please treat the matter as urgent.” 9. It was submitted that in response to the show cause notice issued by the AO, the assessee vide its letter dt. NIL has submitted as under: “Please refer to your notice dated 26/12/2018 regarding the applicability of Section 115BBE of the Income Tax Act. In the regard it is submitted that a survey was conducted at the premises of M/s Shankar Agro Foods which was taken over by M/s Bindas Foods Pvt. Ltd. and there was a surrender of a sum of approximately INR 2 crores as Normal Business Income. The said surrendered income did not include any income referred to in sections 68, 69, 69A, 69B, 69C or 69D. The said surrender was made just to buy mental peace and avoid unnecessary harassment. The cheques for tax payable on this surrender were issued at the rate of 30% of the surrendered amount and accepted by the department. Thus it becomes clear that section 115BBE has no applicability on this surrender which is normal income. It is therefore requested that the surrendered income may be treated as normal business income and taxed at the normal rate which is thirty percent.” 10. It was submitted that the assessee, through another submission dt. NIL filed before the AO, has submitted as under: “With reference to above subject matter, It is further explained that surrender amount comprises only business reflected as detailed below:- Surrendered on Account of Difference in Stock 1,02,98,582.00 Surrendered on Account of Amount Receivable 19,79,822.00 From Manohar Lai Fakir Chand Surrendered on Account of Amount Receivable 2,57,147.00 From Pyare Sukhdev Surrendered on Account of Amount Receivable 76,63,171.00 As per Loose papers Total Amount Surrendered 2,01,98,582.00 It is apparent from above, that stock is a business commodity & is not covered U/s 115BBE read with Section 68, 69, 69A, 69B, 69C, 69D. In the Normal Course of business difference in stock arises which at the time of survey has been surrendered as business income. 7 Surrendered Amount on Account of Debtors as detailed above is merely business debtors having trading of food grains etc. with the assessee. All the above firms are also having Regular business dealing with us (Copy of Account is here enclosed). There is no applicability of section as below:- Section 68 :- "No Sum Found credited in Books of Accounts" No Unexplained Sum has been found credited in Books of Accounts and so Section 68 is not applicable. Section 69 :- "Unexplained Investments" There is no Unexplained Investments in our surrender, So Section 69 is Not applicable. Section 69A :- "No Unexplained" Money, Jewellery, Bullion or other valuable article has been found during the survey and hence Section 69A is not applicable. Section 69B :- "No Unexplained Investment" found during the survey, So there is no question of not fully disclosed. Section 69C :- "No Unexplained Expenditure" is surrendered during survey, So there is no applicability of Section 69C. Section 69D :- "No Amount Borrowed/Repaid" on Hundi which is surrendered, So Section 69 D is also not applicable. From the above it is clear that, assessee does not falls under the provisions of Section 115BBE. In view of above, you are requested to assess the income at Normal Rate of Taxes.” 11. It was submitted that after taking into consideration, the submissions so filed by the assessee and after due examination, the AO has passed the speaking order wherein in Para 4, he has drawn reference to the show cause issued to the assessee on 26/12/2018, thereafter responses filed by the assessee and thereafter in para 5 has recorded categorical finding that deeming provision of Section 115BBE are not applicable. It was accordingly submitted that the matter has been duly examined by the AO and a plausible view has been taken and in such circumstances, the Ld. Pr. CIT(Central) cannot sit-in judgment and take a different view in the matter. 8 12. Further, drawing reference to the findings of the Ld. Pr. CIT(Central) in para 12 of the impugned order wherein he has stated that the moment any income representing any excess stock / investment/receivables / cash/ bullion etc. is found during the course of survey/search and not recorded at the relevant point of time in the books of account, the same would be constituted in the nature of deemed income as mentioned under section 69, 69A, 69B and 69C of the Act and the provision of Section 115BBE are attracted, it was submitted 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. 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 and in support, reference was drawn to the Coordinate Chandigarh Bench decision in case of Gandhi Ram Vs. The Pr. CIT (in ITA No. 121/Chd/2021 vide order dt. 04/08/2022). It was accordingly submitted that the order so passed by the ld PCIT(Central) be set-aside and the appeal of the assessee may be allowed. 13. Per contra, the Ld. CIT/DR has relied on the order of the Ld. Pr. CIT(Central) and it was submitted that it is clear case where the AO accepted the version of the assessee without verifying and examining as to how the income surrendered has been offered to tax as normal business income. It was submitted that no details of purchase made from various persons which resulted in unaccounted / unexplained stock in trade were divulged nor the details of sales made to various persons from whom receivables of Rs. 99,00,000/- have been shown have been submitted. It was submitted that mere recording of these transactions in the books of account subsequently without any corroborative evidence and offering the same to tax would not meet condition of recording in 9 the books of account and offering the satisfactory explanation with regard to nature and source thereof. It was submitted that provisions of Section 69/69A still get triggered because the primary requirement of explaining the source of income from any particular business / profession has not been satisfied. 14. Further reference was drawn to the findings of the Ld. Pr. CIT(Central) at para 13 to 15 which read as under: “13. The process of assessment under the Act is not a mechanical one but involves the quasi-judicial function wherein the AO has to first investigate on his own to the extent that a satisfaction of a prudent person can be reached on any particular issue in the facts and circumstances of the case and if satisfied then pass a speaking order stating the reasons on judicial principles as to why, a particular sum or transaction is chargeable to tax under the Act. The AO cannot close his eyes to the material available before him from further examination and accept the submissions as gospel truth. This unfortunately is not the case here as no investigation has been carried out by the AO in respect of the above. 14. In view of the above facts and circumstances, it is abundantly clear that the AO has failed to apply the law properly and make the inquiries and verification which were required to be made in respect of surrendered income as discussed above. Proceedings under income tax being civil in nature, even the circumstantial evidences based on preponderance of probability are enough to fasten the tax liability as held by in Sumati Dayal Vs CIT 214 ITR 801 (SC). The AO did not even carry out the requisite examination of details furnished or made inquiries to bring on record material before completing the assessment. 15. Provision of Section 263 of the Act stand amended w.e.f 01.06.2015. Explanation-2 has been introduced deeming certain situations where any order passed has to be erroneous and prejudicial to interest of revenue. In view of the above, it is evident that the requisite inquiries as detailed above have not been made in the facts and circumstances of the case, as specifically provided under Clause (a) of Expln-2 of section 263 of the Act. The use of expression ..." Inquiry or verification which should have been made" ... in clause (a) of Explanation-2 to section 263 of the Act takes into its ambit even the cases, where though some inquiry might have been done but lacks the inquiries which should made in the opinion of PCIT on the facts and circumstances of the case. Thus, now, after amendment, inquiry which should have been made in the opinion of PCIT but not actually made by the AO, would also lead to invoking the provisions of 263 of the Act. In view of the above, the order passed by AO not only lacks the inquiries which should have been made but is also found to be clearly erroneous as well as prejudicial to the interest of revenue on the issue of unaccounted/unexplained stock-in-trade of Rs.1,02,98,582/- and unaccounted/ unexplained receivables of Rs.99,00,000/- shown in its P & L account of the relevant year. The AO has failed to 10 ascertain and verify that whether the requisite entries have been passed in regular books of account 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.” 15. Further reliance was placed on the decisions in case of Famina Knit Fab Vs. ACIT 176 ITD 246 (Chd Trib), Fakir Mohamad Haji Hasan Vs. CIT 247 ITR 290 (Guj), Pr. CIT Vs. Khusi Ram & Sons Foods (P) Ltd. in ITA No. 126 of 2015 dt. 29/07/2016 (P&H) and Kim Pharma Pvt. Ltd. Vs. CIT 216 Taxman 153 (P&H). He accordingly supported the order and the findings of the Ld. Pr. CIT(Central) and submitted that there is no infirmity in the order so passed by the ld PCIT(Central) and the appeal so filed by the assessee deserve to be dismissed. 16. 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 explanation so offered by the assessee. In this regard, we find that survey operations u/s 133A were conducted at the business premises of M/s Shankar Agro Food and whose business has since been taken over by the assessee company, M/s Bindas Food Pvt Ltd. During the course of survey, statement of Shri Kewal Krishan, Partner in M/s Shankar Agro Food and now Director in M/s Bindas Foods Pvt Ltd was recorded on 31/08/2016 and the relevant contents thereof read as under: “Q.3:- Your attention is drawn towards the trading account submitted by you and the stock statement counted physically whereby there is a difference of stock to the extent of 2086 Qtls. when this is calculated at average rate, the excess stock comes out to Rs. 1,02,98,582/- Please explain the discrepancy? Ans:- I acknowledge the difference in stock found during physical verification. To cover up the discrepancy, I voluntarily surrender an income of Rs. 1,02,98,582/- over and above my regular income. Q.4:- Your attention is drawn to page no.1 of Annexure A-2 wherein an amount of Rs. 19,79,682/- is mentioned. The page reads in as Manohar Lal Faqir Chand Commission Agent, Mudki/Kabbar Vachha. Please explain about the same? 11 Ans:- The amount of Rs. 19,79,682/- is receivable from M/s Manohar Lal Faqir Chand, which we did not account for. Now I surrendered this amount of Rs. 19,79,682/- as our voluntary income. Q 5. Your attention is drawn to page no. 11 of Annexure A-2, wherein an amount of Rs.2,57,147/-is written. The slip reads in as ‘Pyare Sukhdev’. Please explain about the same. Ans: - This amount of Rs. 2,57,147/- is receivable from M/s Pyare Sukhdev which we did not account for. Now I surrender this amount of Rs. 2,57,147/- as our voluntary income. Q 6. Your attention is drawn to various other loose slips numbering 1 to 15 which deals in Rs. 76,63,171/-. Please explain nature and details of these slips and entries therein? Ans:- These are the various amounts receivable from various parties by us. I acknowledge the fact that these amounts could not be entered into books of accounts at that time. Now realising the mistake, I voluntarily surrender the amount of Rs. 76,63,171/- over and above my normal income. Q 7. Do you have anything else to say? Ans: - I am surrendering total amount of Rs. 2,02,00,000/- purely on voluntary basis without any pressure or fear. Further, I want to state that the Income Tax Team was very courteous and cooperative. I further plead that I may be excused from penalty and prosecution.” 17. In this regard, we further refer to the surrender letter dated 01/09/2016 submitted by the assessee company before DDIT(Investigation), Ludhiana and contents thereof read as under: To. Dated: 01/09/2016 The Deputy Director of Investigation, Ludhiana Sub - Surrender of income in lieu of Survey Action on our premises u/s 133A. Dear Sir Our premises were Surveyed u/s 133A by Income Tax Department and a team lead by Sh. Prem Singh, IRS Deputy Commissioner Income Tax. During the Course of Survey certain discrepancies were found as (per) our recorded statements. To buy peace of mind and to avoid litigation we voluntarily surrendered a sum of Rs. 2,02,00,000/- (Rupees two Crore and two Lacs only) the detail of which are given below:- 12 Due to Difference in Stock - Rs. 1,02,98,582/- On Account of Amount Received - Rs. 99,01,418/- We are enclosing cheques details as below. Further the surrendered amount will be shown in our income for F.Y. 2016-17 in addition to our normal income. This surrender is voluntary and subject to no penalty and prosecution. The cheques are issued against Taxes on surrender Income. CH No. 396551 dt 15.11.2016 - Rs. 17,40,000/- CH No. 396552 dt 15.03.2017 - Rs. 17,00,000/- CH No. 396553 dt 30.06.2017 - Rs. 17,00,000/- CH No. 396554 dt 30.09.2017 - Rs. 17,00,000/- Rs. 68,40,000/- This amount is given in four installments due to financial hardship and seasonal nature of our business. It is therefore requested that the installments as requested may be granted. It is further requested that the firm is likely to be taken over on the basis of as it is (assets & liabilities) by a company Bindas Agro Foods Pvt. Ltd. and this surrender will stand in the name of said company if it is taken over and the liabilities of this firm will cease being merged in aforesaid company. Thanking you, Yours faithfully Sd/- Partner 18. The nature of surrendered income was therefore difference in stock and unrealized sundry receivables generated out of out of book sales undertaken by the assessee. The factum thereof has been accepted by the Survey team lead by ld DDIT (Investigation) and thereafter by the Assessing officer during the course of assessment proceedings after due examination. The Assessing officer has issued a specific show-cause dated 26/12/2018 and has referred to the survey proceedings wherein it was stated that stock inventory was prepared physically and compared with the books of account and it was observed that 13 there was difference in the stock. Besides, there were certain loose documents / accounts in respect of certain parties representing the amounts receivables. All these issues were duly confronted to Sh. Kewal Krishan as per the statement recorded on 31.08.2016. Keeping in view the discrepancies in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below: “Surrendered on account of difference in stock Rs. 1,02,98,582/- Surrendered on account of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 19. And the assessee was issued a show-cause as to why the provisions of section 115BBE be not invoked and thereafter, after taking into account the findings of the survey team and his own independent examination, the AO has accepted the nature and source of surrendered income as arising out of business operations subject to normal taxation as against taxation under the deeming provisions of 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 and it is clearly emerging that the source of such income is from its business operations. Further, the said fact is corroborated by physical stock taking conducted by the survey team and there is no finding that the stock so found is different from the one in which the assessee deals regularly and comparison thereof with the stock recorded in the books of accounts, the details of the parties from whom the amount was receivables as part of regular business dealings and the surrender letter dated 01/09/2016. 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. Following the surrender so made during the course of 14 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 2,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. 20. 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 survey, the statement of the partner/director of the assessee company recorded during the course of survey, the surrender letter and the return of income, 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. 21. 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 69/69B/69C etc, the provisions of section 15BBE 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 15 proceedings and the same is the essence of the statutory provisions as duly recognized by the Courts. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn’t mandate the Assessing officer to invoke the deeming provisions automatically 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. In case of Gandhi Ram (Supra), speaking through one of us, it was held 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.” 22. As we have noted above, 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 partner/director 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 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, 16 the picture which is clearly emerging from the material available on record is the nature of surrender is amount of difference in stock of goods regularly dealt with by the assessee in normal course of its business and unrealized receivables from the sales undertaken by the assessee as part of his regular business dealings 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. We find that similar view has been taken by the Coordinate Chandigarh Benches in case of Famina Knit Fab (Supra) after taking into consideration the decisions of the Hon’ble Punjab and Haryana High Court in case of Khushi Ram (supra) and Kim Pharma (supra) and wherein it was 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 account. 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 account and in order to buy peace of mind, the same is surrendered as income under the head business for RY. 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 FY. 2012-13, the surrendered income will be adjusted against these losses." [Extracted from the impugned assessment order; pages 5 &6]." 17 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, 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/ss. 69, 69 A, 69B and 69C of the Act and the same is held to be in the nature of Business Income of the assessee. Having held so, the same was assessable under the head “ business and profession” and as stated above, the benefit of set off of losses, both current and brought forward, was allowable to the assessee in accordance with law. 21. The contention of the Revenue, therefore, that the income be treated as deemed income u/s. 69,69A/B/C of the Act is, accordingly, rejected and, as a consequence thereto, the plea that no set off of losses be allowed against the same u/s. 115BBE of the Act, also is rejected." 23. In the instant case, as we have discussed above, it is evident that deeming provisions are not applicable. 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 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. 24. 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 18 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. 25. In the result, the appeal of the assessee is allowed. ITA No. 406/Chd/2021 26. In ITA No. 406/Chd/2021, the assessee has taken the following grounds of appeal: 1. “That the initiation of proceedings u/s 263 by the Learned Pr. CIT (Central), Ludhiana are against the facts and bad in law. 2. That the Learned Pr. CIT (Central), Ludhiana has erred in initiating the proceedings & in passing the order u/s 263 of the IT Act, 1961 and directing the AO to assess the surrendered income during survey of Rs.25.00 Lakhs u/s 69 read with section 115BBE of the IT Act, 1961 and make fresh assessment. 3. That the Learned Pr. CIT (Central), Ludhiana has erred in finding that assessment already framed was erroneous & prejudicial to the interest of revenue as the assessment was framed by the AO after thorough investigation & proper application of mind. 4. That the worthy PCIT, Patiala has erred in applying Explanation 2 to section 263 inserted w.e.f 01.06.2015 as the concerned Assessing Officer had duly made appropriate enquiries and applied his mind and assessed the income offered during survey as business income. 5. That in any case the order of the Learned Pr. CIT (Central) passed u/s 263 is against the law and deserves to be quashed. 6. That the Appellant craves leave for permission to add, amend or alter any ground of appeal at the time of hearing.” 27. Briefly the facts of the case are that a survey operation was conducted at the business premises of M/s Shankar Agro Foods and M/s Bindas Agro Foods Pvt. Ltd. C/o Shankar Rice & General Mills. Thereafter the assessee, who is a 19 partner/director in these concerns filed his return of income declaring total income of Rs. 43,79,870/- on 30/10/2017 which was selected for scrutiny and notices under section 143(2) and 142(1) were issued and thereafter after calling for necessary information and documentation, the assessment was completed under section 143(3) vide order dt. 17/12/2018 accepting the returned income. 28. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause dt. 08/03/2021 was issued to the assessee. In the show cause notice, the Ld. Pr. CIT has stated that the assessee has voluntarily declared an income of Rs. 25,00,000/- being the amount of undisclosed income on account of documents found during the survey operation. As per the order sheet dt. 07/12/2018 and the surrender letter, the assessee has surrendered an amount of Rs. 25,00,000/- on account of amounts receivables and the tax was calculated by the assessee at the normal rate and accordingly paid the taxes. However, the assessee has declared undisclosed income of Rs. 25,00,000/- in his ITR and hence the case falls under the ambit of section 68 of the Act, which is to be taxed under section 115BBE of the Act. It was stated by the Ld. Pr. CIT that the income returned includes an amount of Rs. 25,00,000/- being the undisclosed income, the tax applicability of the section 115BBE is to be applied for the tax computation purpose whereas in the returned income, the tax was calculated at normal rate which has resulted in short levy of tax and interest of Rs. 13,29,450/- and in view of the same, the assessment order passed by the AO under section 143(3) is apparently erroneous in so far as prejudicial to the interest of the Revenue. 29. In response to the show cause, the assessee filed his submission which were considered but not found acceptable to the Ld. Pr. CIT and the assessment order so passed was set aside to the file of the AO to be passed afresh in accordance with the findings and directions in the impugned order which are under challenge before us. 20 30. During the course of hearing, the ld AR drawn our reference was drawn to the assessment order wherein there is a clear findings recorded by the AO stating that: “In the year under consideration, the assessee has voluntarily declared an income of Rs. 25,00,000/- being the amount of undisclosed income in the course of survey operation under the head “Income from business profession” on account of documents found during the survey operation. After discussion, the income of the assessee is assessed at Rs. 43,79,870/-. As the income returned includes an amount of Rs. 25,00,000/- being the undisclosed income. The impounded material has been examined and discussed during the course of proceedings.” 31. It was accordingly submitted that the AO has taken into consideration the findings of the survey team and the documents found during the course of survey and has thus made necessary and requisite inquiry/verification before passing the assessment order and therefore the findings of the Ld. Pr. CIT that there is no proper inquiry or verification done by the AO cannot be sustained in the eyes of law. 32. It was further submitted that in this case, the AO has clearly mentioned that surrendered income is income from business and therefore there is no question of applicability of Section 69 r.w.s 115BBE of the Act as the AO has clearly held that the same is in the nature of business income and once such an opinion has been formed which is a plausible view, the same cannot be substituted for the view taken by the Ld. Pr. CIT. 33. It was further submitted that at the time of survey, the assessee was merely a partner in the firm and he has surrendered the income of Rs. 25,00,000/- being profit earned from the business and he was not having any other independent source of income. Therefore the surrender so made was accepted by the Survey team. It was further submitted that the surrender letter has been duly accepted by the Department and which mentioned the calculation of income tax of Rs. 7.40 lacs on the surrender income of Rs. 25,00,000/-. It was accordingly submitted that the amount of tax at normal rate has been duly accepted by 21 the Department well before the assessment order and which has again been verified during the course of assessment proceedings and therefore there is no question of applicability of deeming provisions on the amount so surrendered by the assessee. 34. Per contra, the Ld. CIT DR submitted that the assessee has offered the unexplained investment / receivables as income in his ITR though he has not done any business as proprietor. There is no mention of any undisclosed business activity resulting in receivables in the surrender letter. Thus the receivables shown under the head business as such cannot be assessed as business income unless the same is corroborated by any other evidence. It was submitted that the assessee was neither carrying on nor had any business during the relevant year as proprietor. Further, the assessee has not maintained any books of account and offering such receivables as taxable income in the ITR under the head business income without any corroborating evidence after the survey triggers the primary requirement of explaining the source of such income under section 69/69A of the Act. 35. It was submitted that mere offering the receivables/investments subsequently as taxable income in ITR without explaining the source and demonstrating existence of business as proprietor or provide by other evidence about its source does not go out of the purview of Section 69 of the Act. It was submitted that invoking of provision 69 of the Act is clearly attracted as the assessee has failed to explain source of income. It was accordingly submitted that the Ld. Pr. CIT has rightly directed the AO to assess the receivable of Rs. 25,00,000/- under section 69 of the Act and apply the rate of tax of 60% under section 115BBE of the Act and the AO having failed to assess the same and order so passed by the AO have been rightly held to be erroneous in so far as prejudicial to the interest of the Revenue. He accordingly supported the order and the findings of the Ld. Pr. CIT and submitted that the appeal so filed by the assessee be dismissed. 22 36. We have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to nature of income surrendered during the course of survey and the explanation so offered by the assessee. In this regard, reference is drawn to the surrender letter and contents thereof read as under: To, The Deputy Director of Income Tax, Ludhiana Sub:- Surrender of Income in lieu of Survey u/s 133A. Dear Sir, Our accounts have been examined during the course of survey on 31.08.2016 at the premises of firm in which I am a Partner/Director. During the course of survey certain discrepancies were found in my accounts for which I hereby surrender a sum of Rs. 23,64,000/- on account of amount receivable over and above my regular income. This surrender is made to buy peace and avoid litigation and is subject to no penalty and prosecution. This amount will be duly shown in our IT Return. I hereby enclose cheque the detail of which are as under:- Ch. No. 656547 dated 15/11/2016 3,65,000/- Ch. No. 656548 dated 30/01/2017 3,65,000/- 7,30,000/- This is for your information please. Thanking You Yours Faithfully Sd/- (Bal Krishna) 37. As is evident from the surrender letter, the survey was conducted at the business premises of the partnership concern where the assessee was the partner and the books of accounts of the partnership concern were examined during the course of survey and basis certain discrepancies, an amount of Rs 23,64,000/- on account of account receivables have been surrendered. Where the books of accounts maintained by the concern in which the assessee was a partner were examined and there are discrepancies so found, the surrender of undisclosed income should ordinarily happen in the hands of the business 23 concern and not in the hands of the assessee, being a partner in the said concern. In the instant case, the factum of the matter is that the surrender was made and accepted by the Survey team in the hands of the assessee, being the partner of the concern for reasons best known to both the parties, the same will however not change the nature of surrendered income being on account of account receivables generated out of book sales undertaken by the concern in which the assessee was a partner. 38. Further, during the course of assessment proceedings, the AO has taken into consideration the findings of the survey team and the aforesaid surrender and has recorded a finding that the assessee has voluntarily declared an income of Rs. 25,00,000/- being the amount of undisclosed income in the course of survey operation under the head “Income from business profession” on account of impounded material and documents found during the survey operation which have been examined and discussed during the course of proceedings and the returned income was accepted. It is therefore a case where the surrender which was otherwise to be made in the hands of the partnership firm has been made and accepted in the hands of the assessee where he was a partner and the fact that such surrender was voluntarily declared in the return of income has been accepted by the AO, the order so passed by the AO may be held as erroneous in so far as the taxability in the wrong hands is concerned, however, the same cannot be held as prejudicial to the interest of the Revenue in so far as the nature of surrendered income and non-applicability of the deeming provisions read with provisions of section 115BBE of the Act are concerned and for the purposes, the detailed discussion and reasoning given supra in case of Bindas Foods Pvt Ltd equally applies in the instant case and not being repeated for the sake of brevity. 39. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income so surrendered by way of account receivables cannot be brought to tax under the deeming provisions u/s 69 r/w 24 section 115BBE. In the result, the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained. 40. In the result, the appeal of the assessee is allowed. ITA No. 407/Chd/2021 41. In ITA No. 407/Chd/2021, both the parties fairly submitted that the facts and circumstances of the case are exactly identical except for the difference in the amount involved. Therefore, our findings and directions contained in ITA No. 406/Chd/2021 shall apply mutatis mutandis to this appeal also and the same is decided in favour of the assessee and the appeal of the assessee is thus allowed. 42. In the result, all three appeals of the respective assessees are allowed. (Order pronounced in the open Court on 16/03/2023 ) 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: 16/03/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar