AI Insights
The case involves Jagdish Kumar Arora, a doctor and businessman, who during a survey conducted by the Income Tax Department, disclosed an income of Rs. 2,05,00,000, which was not recorded in his books. This income was treated as undisclosed income by the Assessing Officer and taxed at a higher rate under section 115BBE of the Income Tax Act, 1961. Arora contested this treatment, arguing that the income was from his business activities and should be taxed at the normal rate. The Tribunal found that the income was indeed business income and not undisclosed investment, and thus, the higher tax rate was not applicable.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 28433 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-02-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2017-2018
Judgement Text
" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;djvihy la-@ITA No. 1195/JP/2024 fu/kZkj.k o\"kZ@Assessment Year : 2017-18 Jagdish Kumar Arora Near Gandhi Manch Bhawanimandi cuke Vs. DCIT Central Circle, Kota LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAVPA4974A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Shrawan Kumar Gupta, Adv. jktLo dh vksj ls@Revenue by: Mrs. Anita Rinesh, JCIT-Sr. DR lquokbZ dh rkjh[k@Date of Hearing : 08/01/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 11/02/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal has been filed because the assessee is dissatisfied with the order of the Commissioner of Income Tax (Appeal), Jaipur-4 dated 04/09/2024 [ for short CIT(A) ] for assessment year 2017- 18. The said order of the ld. CIT(A) arise as assessee had challenged the order dated 25.12.2019 passed by ACIT/DCIT, Circle-1, Kota [ for short AO 2 ITA No. 1195/JP/2024 Jagdish Kumar Arora ] under the provision of section 143(3) of the Income Tax Act [ for short Act]. 2. Here, the assessee has challenged the impugned order of CIT(A) by raising following grounds of appeal: “1. The impugned order u/s 143(3) of the I.T. Act, 1961 dated 25.12.2019 as well as the notices issued and action taken and notices issued are illegal, bad in law and on the facts of the case for want of jurisdiction and various other reasons and further contrary to the real facts of the case hence the same may kindly be quashed. 2.1 The ld. AO as well as the ld. CIT(A) have grossly erred in law as well as on the facts of the case in treating the surrendered income on account of sundry debtors and excess cash found as income undisclosed or unexplained investment or money u/s 69 & 69A in place of “business income” as the same was generated from business or was of business income and also erred in making the addition of Rs.2,05,00,000/- u/s 69 and 69A on account of surrendered income. also erred in making the addition without invoking the provision of sec. 145(3) and without rejecting the books of accounts, also erred in not considering the material and details in their true perspective and sense despite available on record. Which are against the provisions as per law and further contrary to the real facts of the case hence the ld. AO may kindly be directed to treat the surrendered income as business income and the additions may kindly be deleted in full. 2.2 The ld. AO as well as the ld. CIT(A) have also grossly erred in not giving the benefit of deduction, expenses or losses against the surrendered income , hence the same may kindly be directed to give such benefit. 3.1: The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the action of the ld. AO in invoking the provisions of Sec. 115BBE and also erred in confirming the action of the ld. AO in taxing the income at the higher tax rate of 60%, 25% surcharge, and 3% cess in place of 30% tax rate, also erred in not considering the material and details in their true perspective and sense despite available on record. Hence the higher tax rate so applied or charged by the ld. AO and confirmed by the d. CIT(A) is also contrary to the real facts of the case and not according to the provision of law hence the same is 3 ITA No. 1195/JP/2024 Jagdish Kumar Arora illegal, bad in law, against the principle of natural justice. The same may kindly be deleted in full. 3.2: The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the application of provisions of higher tax rate at the rate of 60%, 25% surcharge, and 3% cess in place of 30% tax rate under the provisions of Sec. 115BBE for the year under consideration with retrospective effects , while the same is not applicable for the year under consideration or applicable from prospective effects. Hence the higher tax rate so applied or charged by the ld. AO and confirmed by the d. CIT(A) in this year are also contrary to the real facts of the case and not according to the provision of law hence the same is illegal, bad in law, against the principle of natural justice. The same may kindly be deleted in full. 4. The ld. AO has grossly erred in law as well as on the facts of the case in charging the interest u/s 234A, B,C and D. The interest so charged is being totally contrary to the provision of law and on facts of the case and hence same may kindly be deleted in full . 5. That the appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.” 3. Brief facts, as emerge from the assessment record, are that return of income was e-filed by the assessee on 06.11.2017 declaring total income of Rs. 2,16,03,180/- from house property, income from business and income from other sources. The case was selected for limited scrutiny through CASS; therefore, notice u/s 143(2) was issued to the assessee on 11.08.2018 by the ITO, Jhalawar which was duly served through registered e-mail by ITBA on 11.08.2018 and also served on 24.08.2018 upon the assessee through notice server. The case was received on transfer to ACIT/DCIT, Circle-1 Kota on 20.09.2018 as the jurisdiction over the case 4 ITA No. 1195/JP/2024 Jagdish Kumar Arora lies with that office. Notice u/s 143(2) was again issued on 12.09.2018 which was duly served through registered e-mail by ITBA on 12.09.2018 and served by registered post. Due to change in incumbent, fresh opportunity of being heard was issued on 08.08.2019. Notice u/s 142(1) and questionnaire were issued to the assessee on 23.08.2019 which was duly served to the assessee through e-mail. In compliance to notice u/s 142(1), the assessee has submitted his reply on e-filing proceeding module on various dates. 3.1 The assessee is a doctor and runs the hospital in the name of JK Hospital at Bhawanimandi. Besides this he is also engaged in to the business of real estate and developers. In the assessment proceeding the ld. AO noted that the assessee had disclosed unexplained investment in the form of sundry debtors at Rs. 2,05,00,000/- during the survey conducted on 04.07.2016. The receipt from sundry debtors had been credited in the cash book till 25.08.2016 and the cash balance was available at Rs. 51,99,631/- in the books as on 08.11.2016. Out of that cash on hand available he had deposited Rs. 50,00,000/- in old currency notes during the demonetization period. Ld. AO noted that the assessee had not disclosed that undisclosed sundry debtors u/s 69 of the Act and had not paid tax in accordance with section 115BBE of the Act. After 5 ITA No. 1195/JP/2024 Jagdish Kumar Arora examination the reply and documents submitted by the assessee, the assessment proceedings were concluded accepting the return of income but while doing so ld. AO considered that income u/s. 69 of the Act and charged tax in accordance with the provisions of section 115BBE of the Act. 4. Feeling dissatisfied with the finding recorded in the order of the assessment, the assessee challenged that order before the ld. CIT(A). The ld. CIT(A) dismissed the contention so raised by the assessee and thereby he confirmed the levy of special rate of tax on the income so disclosed by the assessee. The relevant finding of the ld. CIT(A) is discussed herein below: “5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The brief facts as narrated in the assessment order are that return of income was e- filed by the appellant on 06.11.2017 declaring total income of Rs. 2,16,03,180/- from house property, income from business and income from other sources. The appellant is a doctor and running the hospital in the name of JK Hospital at Bhawanimandi. As stated by the appellant he is a shareholder in Rajat City Developers Ltd and a partner in a partnership firm i.e. M/s Silver Wings Life Spaces engaged in the business of real estate builders and developers Survey u/s 133A was carried out in the business premises of appellant on 04.07.2016 on the group of Arora family and a diary was found where in particulars of unaccounted debtors to the tune of Rs.20500000/- were maintained. On being confronted, the amount of undisclosed debtors was surrendered for taxation as additional income of the A.Y. 2017-18. As noted in the assessment order the appellant has declared this surrendered undisclosed debtors in the return of income however appellant has not declared such undisclosed debtors u/s 69 of the 6 ITA No. 1195/JP/2024 Jagdish Kumar Arora IT Act in the income tax return but disclosed under income from other sources and tax paid at normal rate. Appellant had deposited old demonetized currency at Rs.50,00,000 in to HDFC bank account No. 50200002190263 during the period of 09.11.2016 to 30.12.2016. During the course of assessment the appellant was asked to give source of this cash deposit into bank account. The appellant replied vide letter dated 20.09.2019 that the appellant had disclosed unexplained investment in form of sundry debtors at Rs.2,05,00,000 during the survey conducted on 04.07.2016. The receipts from sundry debtors had been credited in the cash book till 25.08.2016 and the cash balance was available at Rs.51,99,631 in the books as on 08.11.2016. Out of this cash in hand the appellant had deposited Rs.50,00,000 in old currency note during demonization period. During the assessment proceedings, the appellant was provided opportunity by the show cause notice and in reply the appellant inter-alia objected on the contention that the rate of tax of 60% as provided under section 115BBE of the Act is not applicable to the assessment year 2017-18. After considering the submissions of the appellant in the assessment proceedings, the learned AO, in conclusion, separately taxed the income on account of unexplained debtors under section 69 (by reducing it from the from the other sources) and applied to the rate of tax of 60% as per section 115BBE of the Act. The appellant has contended that the survey team has not found any material to show that assessee has carried out any other activity as shown by him in his filed Income Tax Return. Therefore the provision of Sec. 68 to 69D is not applicable on the assessee. The debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue. In this contention, the appellant has assumed that the onus is on the assessing authority to show the source of the unexplained investment. However such an interpretation is against the judgements of honourable Supreme Court as discussed in subsequent paragraphs. In the present case, the appellant had shown the income surrendered during the course of survey under the head of income from other sources in the income tax return. Even as per the appellant himself such income is not business income. Further, the sources of the cash which was given as cash advances to the parties details of which were unearthed during the course of survey action, remained completely concealed and undisclosed in the present case. The sources could be 7 ITA No. 1195/JP/2024 Jagdish Kumar Arora anything and could be falling in any year. It is for the appellant to prove the source and the year of earning such unaccounted cash income. It is the indisputable fact of the case that the appellant is having unrecorded and undisclosed cash advances for which the sources have not been explained by the appellant and such advances were surrendered for taxation when these were unearthed during the course of survey action on the Arora family group. Such concealed advances are having separate identity of their own. Further the contention of the appellant that the advances unearthed during the course of survey are the normal business debtors is incorrect and faulty. The appellant is a doctor and partner and shareholder in real estate businesses. In the submissions the appellant has not explained from which proprietorship business of the appellant such debtors were created. The figures of all the unexplained cash advances / claimed debtors are in round figures / whole figures of lakhs and each figure being less than 10 lakhs. Most of the figures are in the range of 4 to 7 lakhs. Figures mentioned in the page are \"4 lakhs\", \"5 lakhs\", \"7 lakhs\" etc. Such round whole amount figures are not expected to be debtors as the business debtors are in specific sums and many a times even exact rupee and paise. Further the details like address of such person, PAN, exact date of business transaction, details of the items sold on credit or services provided on credit, etc. are also not provided by the appellant and also not mentioned on the diary found during the course of survey. No contents have been mentioned in the diary which can indicate that these are the debtors and not the cash advances or cash loans. Business transactions are usually not recorded like this and this kind of recording of business transactions of large amounts in the diary is beyond human probabilities. The appellant has not provided any verifiable information which could be verified to ascertain the truthfulness of the statement of the appellant. As such the statement of the appellant is a mere self-serving statement and without any supporting and is liable to be rejected. The appellant has also placed on record the cash book of the appellant for the period 01.07.2016 to 31.12.2016, from the perusal of the same it is seen that the appellant is having transactions a very very small amount in comparison only to the basis. For example on the date of 01.07.2016, the total of debit transactions in the cash book are Rs. 1490 and a total of credit transactions in the cash book are nil. Similarly on the date of 02.07.2016, the total of debit transactions in the cash book are Rs. 1885 and total of the credit transactions in the cash book are Rs. 31,000. This shows that the appellant in no scenario and circumstances could have had debtors Rs. 2,05,00,000 within the first three months of the financial year under appeal as the survey took place on 04.07.2016. 8 ITA No. 1195/JP/2024 Jagdish Kumar Arora Further the unaccounted transactions are likely to be some similarity or some co- relation with the recorded transactions. In other words if the appellant was having unrecorded debtors of Rs. 2,05,00,000 as found during the survey, the appellant should have or would have had recorded debtors of somewhat significant amount of few crores. However the appellant has not shown so. Another important factual aspect of the case is that in the diary which was found during the course of survey, on the page on which the unrecorded debtors / cash advances are mentioned, the title of such page in Hindi language is \"MAAH APRIL 2016\" which means \"Month April 2016\". As per the claim of the appellant, thus, these debtors were generated in proprietorship business of the appellant within one month. However, there are no details of the business on record of the appellant whereby the appellant is having unrecorded business sales of more than Rs. 2Cr. in one month. Further, no such transactions details of the subsequent months have been found which shows that these are not the business debtors but the unexplained cash advances/loans The appellant has also filed affidavit dated 05.06.2022, whereby it has been stated that diary was found during the course of survey wherein undisclosed debtors (which are found to be in the nature of undisclosed cash advances/loans) were mentioned and the appellant was pressurised to surrender the same. First of all this affidavit is not admissible as this is the additional evidence and no application under rule 46A has been filed by the appellant. The same is rejected on this ground. Further the allegation of pressure has been raised by the appellant after a period of six years as the survey was carried out on the date of 04.07.2016. This affidavit has been filed by the appellant after the completion of the assessment wherein tax demand has been raised on the appellant. Considering the totality of the facts and circumstances of the case, it is clear that this affidavit a mere afterthought and is baseless and not bona fide and is liable for rejection. The same is hereby rejected on merits as well. Appellate has not produced any complaint lodged with higher officials supported by affidavit swearing that the contents of statement are incorrect and it was obtained under force, coercion. The statements in the retraction has to be duly supported with evidences. Similarly the allegations of coercion etc., if any, in the retraction has to be supported with evidences. In Manmohansingh Vig v Deputy Commissioner of Income Tax, Circle 1(1), [2006] 6 SOT 18 (Mum), the ITAT while coming to a conclusion as to the admissibility of a retraction made on an affidavit by the assessee, laid out certain reasoning for not admitting the same. The conclusions drawn by the Tribunal would be useful for us and gives us an insight to ascertain as to what the Courts have regard to, while dealing with retractions and how a retraction should be framed. The relevant extract is given hereunder:- 9 ITA No. 1195/JP/2024 Jagdish Kumar Arora x x x x The Hon'ble Punjab and Haryana High Court has also held in its decision dated 24/09/2007 in the case of Rakesh Mahajan Vs. CIT cited at 642 of 2007 (Taxpert) and 214 CTR 218 that \"It is well settled that admissions constitute best piece of evidence because admission are self-harming statements made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming one’s own interest unless such a statement is true.” In the case of Bachittar Singh vs. CIT [2010] 328 ITR 400 it is held by the Hon’ble Punjab & Haryana High Court as under:- x x x x In the case of judgment in the case of Dr. S.C. Gupta vs. CIT [2001] 118 Taxman 252 (Allahabad), it is held by the Hon’ble Allahabad High Court as under:- x x x x The Hon'ble Delhi High Court in the case of Raj Hans Towers (P.) Ltd. v. Commissioner of Income-tax-V [2015] 56 taxmann.com 67 (Delhi)/[2015] 230 Taxman 567 (Delhi)/[2015] 373 ITR 9 (Delhi) [27-01-2015] held that where the appellant had not offered any satisfactory explanation regarding surrendered amount being not bonafide and it was not borne out in any contentions raised by the appellant, additions made after adjusting expenditure were justified. The relevant para of the judgements are as under:- x x x x In the case of Pebble Investment and Finance Ltd. vs. ITO in ITA No. 988/JP/2014 it is held by the Hon’ble Bombay High Court as under:- x x x x Further, the appellant has also relied upon the judgment in the case of PCIT vs. Bajargan Traders [2017] 86 taxman.com 295 (Raj.) (12.09.2017). In this judgment of Hon’ble High Court, inter-alia, the following paras of the order of Hon’ble ITAT have been extracted. x x x x As per the above judgement (i) source of investment/expenditure is (should be) clearly identifiable and (ii) undisclosed asset has no independent existence of its own or (iii) there is investment/expenditure no separate physical identity of such Further, in the judgement of Hon'ble High Court in the case of Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan) [12-09-2017], the paras from the judgement of Hon'ble ITAT in the case of 'Bajargan Traders' have been extracted and in the judgement of the Hon'ble ITAT there is reference and reliance upon another judgement of Hon'ble 10 ITA No. 1195/JP/2024 Jagdish Kumar Arora ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016). Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, it is held by the Hon'ble ITAT that the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. Hon'ble Supreme Court in Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) has given a verdict upholding the reverse view that onus to identify the source solely lies on the assessee and it cannot be shifted to the assessing authority. Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, it is held by the Hon'ble ITAT that \"The revenue has not pointed out that the excess stock has any nexus with any other receipts\". As as per judgement of Hon'ble Supreme Court there is no onus on the assessing authority to look for or identify the sources. As per the ratio of the judgement, it cannot be the case that if the AO has not proved the source from some other receipts then the source is to be treated as business income of the year. Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968, held that onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same. This judgement has been referred in detail in the later part of this order. Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016) which is relied upon by the Hon'ble ITAT in the case of Bajrang Traders, also observed that the in the case of Choksi Hiralal Mangnlal v. DCIT 131, TTJ (Ahd.) 1 \"has held that in a cases where source of investment/expenditure is clearly identifiable and .........\" Even as per the judgement of Hon'ble ITAT referred in the judgement of Bajarang Traders (supra), source of investment/expenditure must be clearly identifiable. The onus in this regard is on the assessee to prove the source. The appellant has not referred to judgement of Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968. Wherein the similar underlying legal principle as discussed in the judgement referred by the appellant has been discussed and decided in favour of the revenue. As per the judgement of Hon'ble Supreme Court, unexplained credit (or investment) cannot be presumed to be business income. Onus to identify the 11 ITA No. 1195/JP/2024 Jagdish Kumar Arora source cannot be shifted on the assessing authority. If the assessee claims so, the assesse is required to prove the same. Further, in the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03- 1977] that even after the items (stock in trade) were \"introduced in the books of account of its business\", the assessee was still required to \"to prove satisfactorily the nature and source of these assets\" and in the event of failure to prove these, \" the revenue could legitimately hold that these assets represented the undisclosed income of the assessee\". Roshan Di Hatti (supra) is case on the similar issue involving issue of stock in trade which was included by the assessee in the books of accounts and even then it was held in the judgement that assessee was still required to prove satisfactorily the nature and source of these assets and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee. There is no presumption in favor of business income. Onus to prove is on assessee. The Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968] has held as under:- x x x x In the case of Roshan Di Hatti v. CIT [1997] 107 ITR 938 (SC) [08.03.1977] it is held by the Hon’ble Supreme Court as under:- x x x x In the case of Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC) [08.02.1963] it is held by the Hon’ble Supreme Court as under:- x x x x As per judgments of Hon’ble Supreme Court in the case of CIT v. M. Ganpathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its extract source. Referring to the above judgments of Hon’ble Supreme Court, it is held by the Hon’ble ITAT in the case of Navin Shantilal Mehta vs. ITO, Ward-32(2)(4), Mumbai [2018] 90 taxmann.com 16 (Mumbai-Trib.) as under:- x x x x In the following cases the excess stock was upheld as taxable in the context of section 69/69B of the Act. 12 ITA No. 1195/JP/2024 Jagdish Kumar Arora In the case of Neeraj Agrawal v. DCIT [2023] 152 taxmann.com 632 (Allahabad- Trib.) it is held by the Hon’ble ITAT as under:- x x x x In the case of Suraj Bhan Oil (P.) Ltd. vs. DCIT [2022] 138 taxmann.com 19 (Madhya Pradesh)/[2022] 286 Taxman 680 (Madhya Pradesh)/[2022] 446 ITR 539 (Madhya Pradesh)(18.02.2022), it is held by the Hon’ble Madhya Pradesh High Court as under:- x x x x SLP against the above judgment Suraj Bhan Oil (P.) Ltd vs. DCIT [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by Hon’ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25.07.2022] x x x x In this case of PCIT vs. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC)/[2022] 286 Taxman 558 (SC)(11.03.2022) [Hon’ble Supreme Court ) it is held by the Hon’ble Supreme Court as under:- x x x x In this case of SVS Oil Mills vs. ACIT, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)/[2020] 269 taxman 508 (Madras)/[2019] 418 ITR 442 (Madras) [26.03.2019], it is held by the Hon’ble Madras High Court as under:- x x x x No double taxation Such Additions of the unexplained investment declared by the Assessee during the course of search/survey does not amount to double taxation. [SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)] Verifiable cash sources behind the unexplained cash advances otherwise unexplained: Ratio of judgement in SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020] 113 taxmann.com 388 (Madras)]. As per this judgement, if the contention of the Assessee was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid as well as back-dated purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because actual purchases had already taken place and already been recorded in the books of accounts of the Assessee. Thus this is an impossible proposition of going back in time. 13 ITA No. 1195/JP/2024 Jagdish Kumar Arora Applying the same ratio, in the present case, the appellant is required to show the verifiable details of the cash sources behind the unexplained cash advances found during the course of survey otherwise the same is unexplained cash advances and thus taxable as per section 69. Head of Income Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargeable to tax under these chapters as per specific provisions contained therein (even before application of provisions of section 68/69/69A etc.) then section 115BBE will not have application. Section 28 is not an inclusive definition as the opening sentence of the section 28 reads as under.- \"The following income shall be chargeable to income-tax under the head \"Profits and gains of business or profession\",\" Accordingly, in case the appellant claims that the income is chargeable under the head business income and nowhere else, the onus is on the appellant to show under which clause of section 28 the claimed income gets covered. Even as per judgement in the Principal Commissioner of Income-tax v. Bajargan Traders, the \"source of investment/expenditure is clearly identifiable\" i.e. the source must be clearly identifiable. In this regard, as per provisions of the Act, not only the source but the year of earning of income also needs to be shown for taxing in the current year under assessment/appeal as the law provides that income for each year be taxed in the ITR/assessment of that year only. This also has ramifications on the interest payable by the taxpayer because if the income was earned in earlier year and the same is being offered to tax now in that case the taxpayer is liable to pay interest for the intervening period. Sections 68/69/69A etc. also provides for year of taxation irrespective of the year of earning of income. However in case the subject matter of addition is not expressly falling under the four chapters of income heads and for the year under assessment/appeal (before application of provisions of section 68/69/69A etc.) in that case applicability of section 68/69/69A etc. is to be seen. If the sources, genuineness etc. are explained satisfactorily i.e, sources are out of genuine disclosed/taxed income in that case and section 68/69/69A etc. are not applicable even in that case section 115BBE will not have application. 14 ITA No. 1195/JP/2024 Jagdish Kumar Arora However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. Section 14 of the Income-tax Act, 1961 Heads of income - Assessment year 1984- 85-Whether opening words of section 14, 'save as otherwise provided by this Act.\" clearly leave scope for 'deemed income of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10-08-2000]] These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Sections 68/69/69A etc. also provides for year of taxation of asset/credit/expenditure irrespective of the year of earning of the source revenue income (if any). Year of earning: The appellant has not proved that these unexplained cash advances were given during the year from the unaccounted cash income of the year under appeal. The appellant has not shown the sources i.e. name, address, PAN, purpose etc. of the funds gone into transfer of cash to such unexplained advances. If the undisclosed income earned and accumulated over the years is taxed in the year in which it is detected by the Revenue and the same is merely taxed as per normal provisions of the law such an interpretation will place a premium on dishonesty i.e. it tantamounts to rewarding the dishonesty. There is no interest burden on such taxpayer even if the income was earned over past years and there is no extra tax rate and deduction of expenses/losses will also be claimed by taxpayer if the same is taxed as per normal provisions of section 28 and onwards. When the receipts do not pertain to the year under appeal the appellant should have declared these receipts in the appropriate year to which these receipts belong 15 ITA No. 1195/JP/2024 Jagdish Kumar Arora and the appellant would have paid the taxes on the same along with the penalty if any arising due to the reopening of the case of the earlier year. By offering these receipts as business receipts of the year under appeal the appellant has unfairly tried to save on these accounts. Legally as per section 28 only the income earned during the year can be taxed. The appellant has not disclosed or clarified under which subsection or clause of section 28 the income falls on this account offered by the appellant for the year. Only by the application of sections 68/69/69A etc. the income is even if earned in earlier year but detected during the year in the form of unexplained credit / unexplained investment etc. is to be taxed in the year in which the application of such income is found. Once sections 68/69/69A etc. are applicable, there is no dispute regarding the applicability of section 115BBE of the Act. Complete code: The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10- 08-2000] that can be taxed. The appellant has not disclosed or clarified under which subsection or clause of section 28 the income falls on this account offered by the appellant for the year. 16 ITA No. 1195/JP/2024 Jagdish Kumar Arora Only by the application of sections 68/69/69A etc. the income is even if earned in earlier year but detected during the year in the form of unexplained credit / unexplained investment etc. is to be taxed in the year in which the application of such income is found. Once sections 68/69/69A etc. are applicable, there is no dispute regarding the applicability of section 115BBE of the Act. Complete code: The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10- 08-2000] that \"6.2 The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments. unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under 17 ITA No. 1195/JP/2024 Jagdish Kumar Arora the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions.\" Summary:- (a) Onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the source of amount invested / spent in unexplained cash advances. The burden has to be discharged with positive material. [As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) [08-03-1977], Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963], CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)]. (b) As per section 69B of the Act, if the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. [As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)]. (c) Unexplained cash advances cannot be presumed to be from business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968] Making book entries regarding the unexplained cash advances does not result into such unexplained cash advances (without details of sources of funds) to be treated as explained. The assessee is required to show and explain the source of the investment in such unexplained cash advances. [Ratio of judgements of Hon'ble Supreme Court in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968 and Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03-1977] (d) Once it was found by Assessing Officer that there was unexplained cash advances, in absence of explanation by assessee, conclusion was inescapable that such cash advances, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was unexplained cash advances undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed - reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022) 18 ITA No. 1195/JP/2024 Jagdish Kumar Arora (e) Undisclosed income or undisclosed investment cannot be explained through another unexplained income or unexplained source. That tantamounts to mere creation of an artificial layer. Verifiable cash sources trail should be behind the undisclosed cash advances detected otherwise such cash advances is to be treated as unexplained. (f) Deemed income under sections 68/69/69A etc. is separate from any 'head of income. If the assessee claims that the undisclosed investment or undisclosed income falls under any particular head of income, the onus in this regard is on the assessee to show under which clause of with section of the respective head of income the undisclosed income of the appellant gets covered, (g) Taxing the undisclosed investment or the undisclosed income at the normal rates of taxes in the year in which these undisclosed were detected rewards the dishonesty. The assessee is not only required to show the sources but also to show with positive evidence the year in which the respective amounts of undisclosed income was earned which were subsequently invested in the undisclosed investment. Sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself. In view of the above discussion the unexplained cash advances (referred as unrecorded debtors by the appellant) has rightly been taxed by the learned AO under section 69 of the Act. Alternatively, the unaccounted and unexplained cash which were used by the appellant to give to the parties was details are mentioned in the diary, such cash is taxable under section 69A of the Act. In view of the above discussion these grounds of appeal are hereby dismissed.” 5. As the ld. CIT(A) has dismissed the appeal of the assessee, the assessee thereby challenged that finding of ld. CIT(A) by the assessee before this tribunal on the grounds as reiterated herein above. In support of the various grounds so raised by the assessee ld. AR of the assessee filed the following written submission: “1. The brief facts of the case are that the appellant asssessee is a well-known doctor and running the hospital in the name of J.K. Hospital. He is practicing since 19 ITA No. 1195/JP/2024 Jagdish Kumar Arora more than last 30 years. Besides this he has been a shareholder in Rajat City Developers Ltd and a partner in a partnership firm i.e. M/s Silver Wings Life Spaces engaged in the business of real estate builders and developers since last 3 years and filing his I.T. Return regularly. In this case a survey action u/s 133A was carried out at the business premises of the assessee on dated 04.07.2016 where a diary was found in particulars of unaccounted debtors to the tune of Rs.2,05,00,000/- which was not recorded in the books of accounts. The statement of assessee was also recorded u/s 133A. On being asked at question no. 13 about the sundry debtors submitted that related to the business is being surrendered as undisclosed income for the current year and entries in dairy at page no. 1 and 2 are related to business unrecorded debtors which are not recorded in the books of accounts, the amount of total unrecorded debtors are Rs.2,05,00,000/- which is being surrendered as undisclosed income for the current year(PB32-333). As, at the time of surrender on the date of 05.07.2016 the tax rate was 30%. Thus the assessee firm has made total surrendered of the Rs.2,05,60,000/- on dated 05.07.2016 at the tax rate of 30%. 2. Thereafter, the assessee firm has filed the return of income on dt.06.11.2017 declaring the total income of Rs.2,16,03,180/-, which are related to the surrendered amount shown under the head of income from other sources. The ld. AO has issue the notice u/s 143(2) on dt.11.08.2018, 09.08.2018 and 12.09.2018 on the following reasons i. Cash deposit during the year ii. Share capital/Capital The ld. AO also u/s.142(1). In response thereto the assessee has filed the reply and details. The ld. AO has stated that the assessee firm has not declared such undisclosed debtors u/s 69 of the act in the return of income but disclosed under income from other sources and paid tax at normal rate. 3. The ld. AO has stated that unexplained debtors in the form of debtors are covered u/s 69 and excess cash is covered u/s 69A of the I.T. Act hence tax should be chargeable u/s 115BBE. Hence, the ld. AO has issued the show cause notice on dt.03.10.2019 asking to the assessee why the tax on Rs.2,05,60,000/- should be charged @60%+surcharge @25% and cess 3% u/s 115BBE. In response to the same, the assessee firm has filed his reply on date. 06.11.2019 also reproduced from page No. 2 to 6 of the assessment order. 4. However, the ld. AO did not accept the contention of the assessee firm and stated that section 115BBE was originally introduced by the Finance Act.2012 w.e.f 01.04.2013 applicable for A.Y. 2013-14 and onwards. Sec. 115BBE was amended vide taxation laws. (second amendment) act 2016 w.e.f.01.04.2017 i.e. for A.Y. 2017-18 and onwards in this amendment the Govt. has only changed the tax rate from 30% to 60% and Surcharge @25% of the income determined u/s 68,69,69A,69B and 69D. The ld. AO has further noted that vide circular No. 3/2017 20 ITA No. 1195/JP/2024 Jagdish Kumar Arora and 11/2019 the CBDT has cleared that the position of the applicability of this section, in which it is clearly mentioned that this amendments take effect from 01.04.2017 and will accordingly apply from A.Y. 2017-18 and subsequent years. The plea of the assessee firm the applicability of provisions of Sec. 115BBE from the A.Y. 2018-19 has also not been accepted by the ld. AO. Thus the ld. AO has charged the tax on the surrendered income of Rs. 2,05,00,000/- at the rate of 60% and Surcharge @25% +3% cess and raised the extra demand. 5. In first appeal assessee filed the detailed WS(PB39-60) and legal position of law. The WS is reproduced in the CIT(A) order. However the ld. CIT(A) has not consider the same in their true perspective and sense. He has not rebutted our WS and legal position. The ld. AO has confirmed the order of the AO. He has not given any adverse finding on our WS and legal position of law. Thus the ld. CIT(A) has summarily dismissed the appeal. Hence this appeal SUBMISSIONS: 1. Firstly on perusal of the assessment order it is clear that the assessment has been made on invoking of Sec. 69 and section 115BBE for taxing the surrender income of Rs.2,05,00,000/- at the rate of 60% and Surcharge @25% +3% cess in place of normal rate and raised the extra demand, which is not the part of the limited scrutiny. 2. Invalid assessment : At the very out-set it is submitted that the ld. AO has issued the notice u/s 143(2) on dt.11.08.2018, 09.08.2018 and 12.09.2018 for the limited Scrutiny on the following reasons i. Cash deposit during the year ii. Share capital/Capital dt. 19.09.2016 (PB-42) by stating that return of income filed by you for A.Y. 2017- 18 on 06.11.2017 is selected for scrutiny”. The ld. AO has provided the reason for scrutiny that for what reason it has been selected, as it was mandatory on the part to mention or write the reason in the notice of 143(2) vide CBDT instruction no. 20/2015 and 05/2016. Vide para20 of instruction which states “ As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year-- one is 'Limited Scrutiny' and other is 'Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: For this preposition kindly refer JDB Finance vs. DCIT ITA No.127/Gau / 2019 September 16, 2020 (2020) 60 CCH 0060 GauTrib where it has been held 21 ITA No. 1195/JP/2024 Jagdish Kumar Arora Eventhough the return of income of the assessee was picked up for limited scrutiny only to examine mismatch in sales as per audited books of accounts vis-à- vis the Income Tax Return, however, the Assessing Officer has erred in disallowing the loss of Rs.42,97,440/- as speculation loss which according to the ld Counsel is in violation of the CBDT Circular No.F. No. 225/402/2018/ITA.II, dated 28.11.2018. From the circular of CBDT, it is abundantly clear that assessing officer would not take up the assessee's case for 'Complete Scrutiny' without duly recording the reasons for expanding the scope of 'Limited Scrutiny', which the assessing officer has failed to do so. Besides, if the assessing officer wants to convert the assessee's case for 'Complete Scrutiny' then he has to place this proposal before the Pr. CIT/CIT concerned and upon his approval, further issue can be considered during the assessment proceeding; which the assessing officer has failed to do so, in the assessee's case, therefore, ld Counsel submits before us that assessment order passed by the assessing officer is bad in law. In order to make the compliance of the notice under section 142(1) assessee appeared before the Assessing Officer along with the books of accounts and has reconciled the mismatch between turnover reported in the audit report vis-à-vis turnover in the Income Tax Return and the Assessing Officer has not taken any adverse view in respect of this issue for which the CASS has selected the return of income of the assessee for scrutiny u/s 143(3). CBDT Circular issued u/s 119 of the Income Tax Act is binding on the Income Tax Authorities. The Assessing Officer's jurisdiction is limited to the issue identified by the CASS in case of 'Limited Scrutiny' cases. In the assessee's case under consideration the issue of mismatch of sales shown in the audit report vis-à-vis ITR was for 'Limited Scrutiny' but the assessing officer has expanded the scope of limited scrutiny without taking permission from the concerned Pr.CIT/CIT, since there is no whisper of any sanction or approval of the Pr.CIT/CIT therefore action of Assessing Officer to assess the loss of Rs.42,97,440/- is beyond his jurisdiction and in violation of the CBDT circular which he was bound to obey. Therefore, action of the Assessing Officer to make addition on account of loss is beyond jurisdiction and therefore null in the eyes of law. In the case of Dev Milk Foods Pvt. Ltd. vs. Add. CIT12th June, 2020 (2020) 59 CCH 0104 DelTribAssessment—Conversion of limited scrutiny into complete scrutiny—Assessee company’s main source of income was freight income and long term capital gains—Return of income was filed—Case was selected for limited scrutiny through CASS—Assessing Officer noted that assessee's case was selected for limited scrutiny with respect to long term capital gains but it was noticed that assessee had claimed a short term capital loss which had been adjusted against long term capital gains—As per Assessing Officer, loss claimed by assessee appeared to be suspicious in nature primarily due to reason that loss could possibly have been created to reduce incidence of tax on Long Term Capital Gains shown by assessee—In order to verify this aspect, approval of Principal 22 ITA No. 1195/JP/2024 Jagdish Kumar Arora Commissioner of Income Tax (PCIT) was taken to convert case from limited scrutiny to complete scrutiny and that assessee was also intimated about change in status of case—Assessing Officer went on to hold that purchase of shares from four brokers against whom there was detailed investigation by Investigation Wing of Income Tax Department in cases of entry operators/shares brokers did not take place and transactions were sham in view of documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities—AO completed assessment after making addition on account of disallowance of short term capital loss, for alleged unexplained expenditure on commission and Rs.1,93,20,000/- on account difference in computation of long term capital gains— CIT (A) upheld disallowance of short term capital gains but deleted addition on account of long term capital gains—Held, there is not an iota of any cogent material mentioned by Assessing Officer which enabled him to have reached conclusion that this case was a fit case for conversion from limited scrutiny to complete scrutiny—If proposal of Assessing Officer and approval of Pr. Commissioner of Income Tax are examined on anvil of paragraph 3 of CBDT Instruction No.5/2016, it is very much clear that no reasonable view is formed as mandated in said CBDT Instruction No.5/2016 in an objective manner and secondly merely suspicion and inference is foundation of view of Assessing Officer—There is no direct nexus brought on record by Assessing Officer in said proposal and, therefore, it is very much apparent that proposal of converting limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries—Pr. Commissioner of Income Tax has accorded approval in a mere mechanical manner which is in clear violation of CBDT Instructions No.20/2015— Co-ordinate bench of ITAT at Chandigarh in case of PayaKumari in ITA No.23/Chd/2011, vide order dated 24.02.2011, has held that even Section 292BB cannot save infirmity arising from infraction of CBDT Instructions dealing with subject of scrutiny assessments where assessment has been framed in direct conflict with guidelines issued by CBDT—Therefore, on an overall view of factual matrix as well as settled judicial position, instant conversion of case from limited scrutiny to complete scrutiny cannot be upheld as same is found to be in total violation of CBDT Instructions No.5/2016—Assessee’s appeal allowed. In the case SMT. MANJU KAUSHIK vs. DCIT IN ITANo. 1419/JP/2019 December 9, 2019(2019) 57 CCH 0607 JaipurTrib it has been held THAT Assessment— Scrutiny assessment—No proper approval—Assessee filed her return of income— Case of assessee was selected for limited scrutiny under CASS—AO issued notice u/s 143(2) thereafter also issued a notice u/s 142(1)—Subsequently AO proposed to disallow claim of deduction u/s 54B—Assessee submitted that assumption of jurisdiction by AO to scrutinize claim of deduction u/s 54B without approval of competent authority to convert case from limited scrutiny to complete scrutiny is invalid—Held, iscrutiny by issuing notice dated 25-11-2016—However, said approval of Pr.CIT was communicated to AO only on 29-11-2016—Therefore, notice u/s 142(1) issued on 25-11-2016 for initiation of complete scrutiny assessment proceeding is prior to receipt of approval accorded by Pr. CIT and thus it is apparent that AO has initiated proceedings for 23 ITA No. 1195/JP/2024 Jagdish Kumar Arora full/complete/comprehensive scrutiny in anticipation of approval to be accorded by Pr.CIT—It is also mandated by CBDT Instructions that competent authority has to grant approval only after satisfying itself about requirements of comprehensive scrutiny of case—Further AO is also required to intimate assessee regarding conversion of limited scrutiny to complete scrutiny in such cases—It is pertinent to note that in proceedings for limited scrutiny AO was satisfied with source of increase in capital of assessee and even did not proceed further after reply and documents filed by assessee in response to notice u/s 142(1) dated 4-07-2016— Only after dropping said notice, AO issued fresh notice u/s 142(1) on 25-11- 2016—AO has finally made addition only on account of disallowance of deduction u/s 54B—Therefore, at time of initiating complete scrutiny, issue under limited scrutiny was not pending with AO as he was satisfied with reply and documentary evidence on said issue—In case in hand, AO has not intimated assessee about conversion of limited scrutiny to complete scrutiny which is a serious violation of instructions issued by CBDT—Hence, AO has taken up issue and initiated proceedings for complete scrutiny without necessary approval with him— Therefore, issue taken up by AO regarding disallowance of deduction u/s 54B is prior to necessary approval communicated to AO and therefore, in absence of communication in writing to AO about approval, assumption of jurisdiction by AO is invalid—Consequently, addition made by AO by denying deduction u/s 54B is not sustainable and same is deleted—Assessee appeal allowed. Here the case of the assessee is on much strong footing because ld. AO has not taken any approval at any time. 3. In the following orders also from various benches of ITAT across country remains at idem on impact of in fraction of scope of CBDT instructions dealing with scope of limited scrutiny assessment and that same would be nullity:- i) Delhi bench ITAT CBS International Project Pvt Ltd.(order dated 28.02.2019). ii) Jaipur bench ITAT Lt Smt GurbachanKaur (order dated 05.12.2019). iii) Jaipur Bench ITATManju Kaushik (order dated09.12.2019). iv) Lucknow bench ITAT Ravi Prakash KhandeIwal(order dated 08.11.2019). v) Mumbai G Bench ITAT order in case of Su-RajDiamond Dealers Pvt Ltd. (order dated 27.11.2019). vi) Mumbai D bench ITAT order in case of R&HProperty DeveloperPvt Ltd. (order dated 30.07.2019). 4. Further the allegation of the ld. CIT(A) that “as per the documents placed on record by the appellant it is not verifiable or seen that the case was selected for limited scrutiny and what were the grounds of selection of case in scrutiny. Further the notices from the learned AO during assessment proceedings vide which the reasons of scrutiny would have been communicated to the appellant has not been placed on record. And also in case the case was selected for limited scrutiny, no material has been placed on record to show that the case was not converted into full scrutiny.” Are absolutely incorrect and wrong because in the assessment order at page 1 it is clearly mentioned that the case was selected for “limited scrutiny 24 ITA No. 1195/JP/2024 Jagdish Kumar Arora through CASS” And all the notices were available on the income tax portal, hence the observation and allegation of the ld. CIT(A) incorrect and liable to be ignored and may kindly be quashed. Further if the ld. CIT(A) was having any doubt he may call the report of the ld. AO and may further asked to the assesse. But he failed to do so and rather make false observation. Hence the assessment is illegal invalid and liable to be quashed and consequent demand so raised made by the AO may kindly be deleted in full and oblige. Written submissions On Merit 5. Directly covered Matter: At the very outset it is submitted that the above mater is directly covered by the decision of this Honble Bench in the assessee’s Group case namely M/s Silver Wings Life Spaces v/s DCIT Circle-01 Kota in ITA No. 511/Jp/2024 dt. 31.07.2024 copy is enclosed. As the assessment order of both the case i.e assessee and M/s Silver Wings Life Spaces were identical and verbatim. Copy of assessment order of M/s Silver Wings Life Spaces is enclosed(PB61-69). As the both the assessee are same group, date of survey/surrender same, AO is same, issue and replies to AO and order of the AO same. Thus the order is liable to be quashed and demand so raised may kindly be deleted in full. 6. TWrongly Interpreted that assessee has considered declared income in survey under the head of income from other source whereas it should be considered under the head of income from business:-The requisite detail with evidences has been submitted during the course of assessment proceeding in compliance of notice u/s 143(2) and 142(1). 6.1. That prior to 1st April 2017 the question whether the declared income sought to be taxed was in the nature of income u/s 68 to 69D or not or the question with regards to nature of activity from which such declared income was derived was not at all relevant as the rate of taxation was same in either case i.e. @ 30% only. 6.2 That survey team has not got any evidence to the contrary, such declared income or assets will have to be considered as derived out the known business activity only, not liable for being taxed at higher rate @ 60% + Surcharge + Cess u/s 115BBE of the Income Tax Act, 1961. Your honor in the following cases income surrendered/detected during the course of survey was held to be taxable as business income:- (i) M/s Silver Wings Life Spaces v/s DCIT Circle-01 Kota in ITA No. 511/Jp/2024 dt. 31.07.2024 ( this is assessee’s own group case) (ii) Construction portal Pvt. Ltd V ITO (ITA No. 1607 & 1608/PUN/2014 A.Y. 2005-06, 2006-07 order dated 06-06-2018. 25 ITA No. 1195/JP/2024 Jagdish Kumar Arora (iii) SAB Industries Limited V DCIT (ITA No. 848/CGL/2017) A.Y. 2013-14 order dated 28-03-2018. (iv) Gavrish Steels (P) ltd V ACIT (2017) 82 Taxman Com 337 Chandigarh Tribunal. (v) Shri Ram Swarrop Sighal V ACIT Circle, Shri Ganga Nagar V Income Tax Officer (ITAT Jodhpur) ITA no. 143/Jodh/2018. (vi) Rajasthan High Court in the case of Bajargan Traders in Income Tax Appeal No. 258/2017 dated 12/09/2017 has held that excess stock found during the course of survey and surrender made thereof in taxable under the head of business and profession. (vii) Kindly refer a direct decision on this issue in the case of Sh. Baljinder Kumar v/s DCIT Circle-1 Ludhiana in ITA No.38/Chd/2023 dt. 02.08.2023 where it has been held that “16. In the instant case, we find that through various questions raised during the course of survey, the assessee has been asked about the nature and source of his income and discrepancies so found during the course of survey. In response, the assessee has stated that he is a partner along with his wife in M/s Supreme Petro Foam Industry, a partnership firm engaged in manufacturing of Foam products and sole proprietor in M/s Shivam Coir Foam Products which is selling Foam products on wholesale and retail basis, and besides that, they have no other source of income/interest in any other business / concern. There were certain discrepancies noticed in respect of M/s Supreme Petro Foam Industry wherein the assessee surrendered a sum of Rs 90 lacs in terms of discrepancy in stock and construction expenses. Further, in respect of M/s Shivam Coir Foam Products, the assessee was asked about the hand-written particulars in terms of certain names and amounts recorded in a diary found during the course of survey and in response, the assessee has submitted that these entries pertain to his proprietorship concern M/s Shivam Coir Foam products, Khanna. It was further stated that these entries are advances/receivables from various persons in respect of his business dealings and were recorded for the purpose of memory. It was further stated that to buy piece of mind, he offers a sum of Rs 15 lacs as additional income for the current financial year subject to no penal action. The same was subsequently reiterated in the surrender letter dated 5/09/2018 wherein the assessee has stated that he offers the additional income for current financial year at normal rate of tax as the said income has been earned by him out of business transactions in the current year. We therefore find that it is a case where there are unrecorded sales made by the assessee during the current financial year and receivables arising out of such unrecorded sales have been offered to tax as additional business income by the assessee. The source of such unrecorded receivables is thus the unrecorded sales which have been explained by the assessee and thus, the necessary nexus with the business of the assessee has been established. The name of the person, the amount receivables, date, etc has been duly recorded in the diary, thus, the 26 ITA No. 1195/JP/2024 Jagdish Kumar Arora statement of the assessee duly stand corroborated by the contents of the diary so found during the course of survey. No doubts, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69 of the Act. 17. In light of aforesaid discussions and in the entirety of facts and circumstances of the case and following the decisions referred supra, the income of Rs 15,00,000/- surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 of the Act and the same has been rightly offered to tax under the head “business income” and as a necessary corollary, in absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration.” (viii) In the case of Montu Shallu Knitwers vs. DCIT In ITA NO. 21/Chd/2023 December 1, 2023 (2023) 69 CCH 0249 Chd Trib It has been held that “22. In the instant case as well, there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co- related with any specific asset and the difference should thus be treated as business income. 23. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head “Income from Business/profession” and apply the normal rate of tax. 10. In the aforesaid factual background, it was submitted that the assessee has been engaged in the business of manufacturing of wearing apparels and is not engaged in any other business and neither the assessee has any other source of income. The same fact has been accepted by the department during the course of survey action as well as during the course of assessment proceedings later on wherein, no adverse opinion w.r.t. any other source of income of the assessee. Hence, in the first instance, it is hereby submitted that the assessee is engaged only in the business of manufacturing of wearing apparels and any income which accrues to the assessee or any asset which is in the possession of the assessee 27 ITA No. 1195/JP/2024 Jagdish Kumar Arora are wholly earned from the business income of the assessee. During the course of survey action on 29.08.2018, the Ld. AO conducted the physical verification of the stock and compared the same with the value of stock in the books of account maintained by the assessee which itself justifies that the department itself believes that the stock belongs only to the business of the assessee. Reliance in this regard is placed on the judgment in the case of Daulat Ram Rawatmull vs. CIT [1967] 64 ITR 593, wherein Calcutta High Court held as under: “ 59/61. In the instant case the assessee is a firm formed for the purpose of carrying on business. There is nothing on record to show that the firm had any source of income other than business. Therefore, in our opinion, it is not unreasonable to hold that any amount representing secret income arose out of business of the firm.” (ix) Reliance in this regard is placed on the judgment dated 18.02.2021 in the case of Shri Harish Sharma vs. The ITO in ITA No. 327/CHD/2020 wherein it was held that that Section 68 not applies when assessee explained nature & source of Income. Hence, when all the incomes earned by the assessee/ assets in the possession of the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69B of the Act and hence taxing such income at special rate as per section 115BBE of the Act is invalid. In the case of the assessee also, there has been no other source of income identified, neither during the course of survey action nor during the revision assessment proceedings initiated later on. Hence, the income of the assessee is only on account of the business of the assessee carried on by the assessee since past many years and in these circumstances, the provisions of section 69B of the Act are not applicable. (x) Further, reliance is also placed on the following judgments: • Hon’ble Chandigarh Bench of ITAT in the case of M/s. Sham Jewellers in ITA No. 375/CHD/2022, wherein, it has been held as under: “Ground Nos. 8 & 9 challenge the action of the lower authorities in applying the provisions of section 115BBE and thereby charging tax at the rate of 60%. The main thrust of the arguments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the assessee and that nowhere in the assessment order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the assessee. The AO has not brought on record any iota of evidence to demonstrate that the assessee had any other source of income except income 28 ITA No. 1195/JP/2024 Jagdish Kumar Arora from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the assessee at the rate of 60% in terms of provisions of section 115BBE of the Act.” • In the case of M/s. Sham Fashion Mall in ITA No. 315/CHD/2022, the Hon’ble Chandigarh Bench of ITAT has held as under: “12.0 In ITA No. 315/CHD/2022, in the case of Sham Fashion Mall, the only issue before us is the challenge to the provisions of section 115BBE by the AO and its sustenance by the Ld. CIT-(A). In this case the returned income has been accepted by the AO. We have also gone through the assessment order as well as the order of the Ld. CIT-(A) and it is seen that nowhere in the orders of both the lower authorities is there any fact brought on record or even a whisper of any allegation against the assessee that the assessee had any other source of income except income from business and income from other source. There is no iota of evidence to even suggest that the lower authorities had unearthed any other source of income of the assessee except under the heads of income declared by the assessee in the return of income. Therefore, in absence of any such evidence of any other undisclosed source of income of the assessee having been detected by the tax authorities, we are afraid that the invocation of provisions of section 115BBE will not hold good in the present case as well. The detailed reasons and observations in this regard have already been incorporated in Para 10.17 to 10.23 of this order in the case of M/s Sham Jewellers wherein also we have rejected the action of the Income Tax Authorities in applying the provisions of section 115BBE of the Act. Likewise, on identical facts and on identical reasoning and law, we allow the grounds of the assessee in the present appeal also and hold that the application of provisions of section 115BBE of the Act in the case of M/s Sham Fashion Mall was bad in law and the same cannot be sustained.” • Hon’ble Chandigarh Bench of ITAT in the case of Gaurish Steels Pvt. Ltd. as reported in 82 Taxmann.com 337 wherein it has been held as under: “It has been held that income surrendered by the assessee during the survey on account of discrepancy in cost of construction of building, discrepancy in stock and discrepancy in advances and receivables would be considered as business income and not as deemed income under section 69.” • In the case of Bajaj Sons. Ltd., the Hon’ble Chandigarh Bench of ITAT, ITA No. 1127/CHD/2019, has stated as under: “The AO has not pointed out any unexplained credit in the books of account, any unexplained investment, any unexplained money, bullion or jewellery, any unexplained expenditure or any amount of loan repaid in the assessment order in this respect. Therefore, the provisions of Section 68, 69, 69A, 69B, 69C and 69D 29 ITA No. 1195/JP/2024 Jagdish Kumar Arora are not attracted on the surrendered amount of Rs. 15 lacs. The said amount of Rs. 15 lacs was offered in case any discrepancy is found in the books of account. However, in actual neither any unexplained investment nor any unexplained expenditure or otherwise any unexplained asset was found during the search action so far as the aforesaid surrender of Rs. 15 lacs was concerned. In these circumstances, the aforesaid surrender of Rs. 15 lacs can be said to have been offered to cover up the discrepancies in respect of likely disallowances of claims, if any, relating to its business income. 9. In view of this, since the aforesaid surrender is not covered under the provisions of Section 68, 69, 69A, 69B, 69C and 69D, the provisions of Section 115BBE are not attracted in this case. 10. In view of the above, the action of the lower authorities in invoking provisions of Section 115BBE on the surrender income of Rs. 15 lacs is set aside and the AO is directed to compute the said surrendered income under normal provisions as applicable to the business income of the assessee. 11. In the result, appeal of the assessee stands allowed.” • The Hon’ble Chandigarh Bench in the case of The DCIT vs M/s Khurana Rolling Mills Pvt. Ltd. as reported in ITA No. 745/CHD/2016: “9. In the facts of the present case, it is not disputed that the surrender had been made on account of undisclosed debtors. Since the facts are identical to that in the case of Famina Knit Fabs (supra), and no distinguishing facts have been brought to our notice by the Ld. DR, the decision rendered in that case will also apply to the present case, following which we hold that the Ld. CIT(A) had rightly treated the surrendered income as in the nature of business income of the assessee and accordingly, allowed the benefit of set off of losses against the same. The order of the Ld.CIT(A) is accordingly, upheld. The ground raised by the Revenue is dismissed.” • In the case of Prashanti Surya Contruction Co. Pvt. Ltd. in ITA No. 315/CHD/2014, the Hon’ble Chandigarh ITAT Bench has held as under: “Since the facts of the present case are identical to that in Gaurish Steels Pvt. Ltd. (supra), the surrender having been made by the assessee on account of investment made in the BOT project which was the business of the assessee, the decision rendered by the I.T.A.T. in the said case will squarely apply in the present case, following which we hold that the income surrendered by the assessee of Rs. 1.75 crores is assessable under the head 'income from business and profession”. • In the case of M/s. Arora Alloys vs. DCIT in ITA No. 1481/CHD/2017 the Hon’ble Chandigarh Bench has held as under: 30 ITA No. 1195/JP/2024 Jagdish Kumar Arora “In the light of the above, let us examine the facts of the present case. The stand of the assessee is that expenditure incurred for construction of building was from the routine business, and such addition of Rs.32 lakhs ought to be treated as business income. We find force in this contention of the ld. counsel for the assessee, because the expenditure incurred for creating a business asset and it must have been generated through the business carried out by the assessee. It is pertinent to bear in mind that expenditure laid out for the purpose of business is to be allowed deduction either as expenditure or to be capitalized on which depreciation will be allowed. The assessee might have earned income from the business which has not been accounted and used for constructing the business asset, though specific details have not been discussed either in the impugned order about the nature of evidence found during the course of survey. We also need not to ponder on this aspect because the assessee has admitted this unexplained expenditure on construction of building. This admission has to be accepted as given by the assessee, wherein it was alleged that it is for the purpose of the business. Therefore, to the extent the expenditure incurred for construction of the building, out of unexplained source is concerned, it is to be construed as earned from the business and it will take character of the business income. Once this income is to be assessed under the “business income”, then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee.” The ld. CIT(A) has not spoken a single word on theses issue and submission and no contrary judgments have been brought, which show he either has satisfied with our plea or he is not having anything to rebut our contention. Hence the income so surrendered is to held as business income on which provisions of Sec. 115BBE is not applicable. 7. Wrongly erred in invoking Sec. 69 of the Income Tax Act, 1961: The ld. has wrongly invoked the provisions of Sec.69 on the income surrendered and declared in the ITR. 7.1 Further during the course of survey action at the business premises of the assessee on 05.07.2016 as well as during the course of assessment proceedings, the Ld. AO has not passed any adverse opinion with respect to any other source of income of the assessee, neither the AO has brought on record any adverse material on record. Hence, the business income is the only source of income of the assessee and moreover, in the case of assessee unrecorded sundry debtors has been found during the course of survey which have been related to business of assessee, hence in the first instance, the department itself has accepted that the said sundry debtors was of the business of the assessee and such debtors are not arose in a single day, hence, it means that these sundry debtors are only from the business income of the assessee. And, hence, all the income earned by the assessee is only on account of such business of the assessee and therefore, 31 ITA No. 1195/JP/2024 Jagdish Kumar Arora needs to be taxed under the business head only. Both the lower authorities have not disputed these contentions nor brought on record to disprove the same. 7.2 Further the ld. AO in the assessment order on page 7 para 7 wrongly stated that “vii) The assessee himself admitted in reply filed on 06.11.2019 that unexplained, investment in form of sundry debtors are covered u/s 69 of the IT Act but the disclosed income u/s 69 in the hand the assessee has not disclosed such undisclosed sundry debtors u/s 69 of IT Act in the IT return but disclosed under income from other sources” While there was no such admission of the assessee in this letter dt. 06.11.2019 vide (PB19-24) also reproduced from page 2 to 6 of the assessment order. Thus the conclusion of the ld. AO was based on wrong facts and liable to be quashed. 7.3 Definition of Sec 69 of the Income Tax Act is “where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and assessee offers no explanation about the nature and source of the investments may be deemed to be the income of the assessee of such financial year”. After reading of Sec 69 it was proved that the following condition must be fulfilled for applicability of Sec 69 of I.T. Act 1961. 1. Assessee has made investment in during the A.Y. 2. Such statement is not recorded in the books of accounts, if any maintained by him for any sources of income. 3. Assessee offer no explanation or explanation is found not satisfaction by A.O. As per language of Section, Sec 69 can be invoked only when the assessee has made investment and not recorded such investment in the books of accounts and offer no explanation or unsatisfactory explanation. Both the condition given in point 2 and 3 are cumulative and satisfaction of either of condition does not automatically triggers rigours of Sec 69. In other words we can say that when the assessee has recorded such investment in his books of accounts then no explanation is required to be offered for the purpose of Sec 69. The addition u/s 69 can be made only when such investment is not recorded in the books of accounts and not offered satisfactory reply. On perusal of the provision it is proved that the provision of Sec 69 of the I. T. Act is not applicable on the assessee. 7.4 That during the F.Y. 2016-17, a survey u/s 133A was conducted on the premises of the assessee on dated 04.07.2016. The assessee declared an amount of Rs. 2,05,00,000/- on account of noted in diary found during the course 32 ITA No. 1195/JP/2024 Jagdish Kumar Arora of survey. Since the survey team could not found any investment made by the assessee which were not recorded in the books of account, any documents/ information/records which showed that assessee was found to be the owner of any money, bullion, jewellery or any other valuable article which were not recorded in the books of account but which showed that the assessee has incurred any expenditure for which it had offered no explanation about the sources of such expenditure or part thereof. Therefore since no evidence was found to show that declared income represented any undisclosed income, the sources of which had not been disclosed by the assessee so it could not be regarded as deemed income under the provision of Sec.69 of the income Tax Act, 1961. The same was also decided in the case of DCIT vs. Khurana Rolling Mills (P) Ltd (ITAT Chandigarh). 7.5 In the above matter there is only one issue (i) whether the surrender income fall u/s 68,69 or under the head income from other sources or business income, (ii) whether the tax on the surrender income should be charged at the rate of 30% +cess or the rate of 60% and Surcharge @25% +3% cess. 7.6 As from the surrender, it is cleared that the surrender was made on account of sundry debtors. As during the course of statements the assessee in Answer to Question No. 13 has submitted that in the diary there are entries of his business unrecorded debtors which are not recorded in the books of accounts, the amount of total unrecorded debtors are Rs.2,05,00,000/- which is being surrendered as undisclosed income for the current year. As the assessee was/is engaged in the business of medical and real estate developers and builders and as the word debtors are used in the firm or business entity as business transaction. For others it is used loan and advances or deposits etc. And the lower authorities have not disputed the same. 7.7 Thus, the surrender was on account of debtors/receivables relating to the business of the assessee firm only and the ld. AO no-where disputed these facts. The Revenue has accepted the surrender as such, as being on account of sundry debtors. It follows that the debtors were generated from the sales/receipts made by the assessee firm during the course of carrying on the business of the assessee firm, which was not recorded in the books of the assessee firm. Though the said income was not recorded in the books of the assessee firm but the source of the same stood duly as being from the business of the assessee firm, the survey team after question 13 no other question has asked from the assesee, to remove any doubt and assessee has signed the statements as recorded in the mental pressure. Even other-wise no other source of income of the assessee firm is found there on record either disclosed by the assessee firm or unearthed by the Revenue. The preponderance of probability therefore is that the debtors were sourced from the business of the assessee firm. Therefore, there is no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B and 69C of the Act and the same is held to be in the nature of Business Income of the assessee firm. Having held so, the same was assessable under the head 33 ITA No. 1195/JP/2024 Jagdish Kumar Arora 'business and profession' and as stated above. And no provisions of 115BBE of the Act is also applicable. On this preposition kindly refer the case of Famina Knit Fabs And Anr. vs. ACIT AND ANR198 TTJ 258 (Chd.). The survey team at the time of recording the statements has also not referred the provisions of 68/69 and 69A nor stated surrendered income shall be taken u/s 68/69 and 69A.Then how the department can take the same u/s 68/69 and 69A. It was the duty of survey team to bring its intention at the time of taking the surrender from the assessee firm. As it was the duty of department to explain the same to the assessee. A general persons cannot understand the technicalities of the complex law of the income tax . And it is also the settled legal position of the law the Income tax Authorities cannot take advantage of ignorance of assessee toward of law. It is law principal of law that right income should be taxed in right and right of income. Only for burden of tax on innocent assessee head of income cannot be changed. It is the duty of Income tax authority who know the law to bring the correct facts and correct law and correct head of income before the assessee. In the case of CIT V/s B.G. Shrik Construction Technology (P) Ltd(Bom.) 395 ITR 371: Claim for deduction not made in the return, Tribunal was justified in holding that the assessee was entitled to make a claim which was not made in the return of income originally filed u/s 153A r/w s143(3) before the ld.AO and also before the appellate authorities . In the case of Pr. CIT v/s Ankit Metal & Power Ltd 182 DTR 333(Cal ) 09.07.2019 that Tribunal has the power to entertain the claim of deduction not claimed before the AO by filing the revised return and tribunal in exercising of its power u/s 254 justified in accepting this claim though no revised return u/s 139(5) was fled before the AO also refer CIT v/s Britania Industries Ltd 396 ITR 677(Cal.) In the case of Suresh Kumar Agarwal vs. JCIT in ITA Nos. 1073 & 1074/JP/2018 Mar 15, 2022 (2022) 64 CCH 0234 Jaipur Trib it has been held Penalty—Penalty for failure to answer question, sign statement, furnish information, returns or statements, allow inspection etc.—Assessee is an individual and having business of Building construction and dealing real estate and after construction completed sold flats as per market price—Assessing Officer initiated penalty proceedings 272A (1)(c)—CIT upheld penalty—Held, there is no finding of AO based on some contradictory evidence to disapprove that explanation offered by assessee was false or assessee was not able to substantiate explanation furnished or fails to prove that such explanation is not bona fide and that all facts relating to same and material to computation of his total income has not been disclosed by him— Ignorance of law is certainly no excuse for a default committed but, at same time, there is no presumption in law that everybody knows law—Application of this rule would differ from case to case and person to person—In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch 34 ITA No. 1195/JP/2024 Jagdish Kumar Arora with law enforcing machinery and not required to discharge any statutory obligations under a particular law—Ignorance of law may be a good excuse in his case—There is no willful failure to comply with summons u/s 131(IA—Therefore order on CIT (A) is accordingly set aside and thus penalty u/s 272A(1)(c) levied by AO is not in accordance with law therefore same is cancelled—Assessee’s appeal of allowed • Hon'ble ITAT, Indore Bench in the case of ACIT v. Anoop Neema vide its order in ITA 05/Ind/2020 dated 06.01.2022 has held: 7. We have heard rival contentions and perused the records placed before us. Revenue’s sole grievance is that Ld. CIT(A) erred in not treating the income of Rs. 1,41,75,568/ declared during the course of search carried out on 15.12.2016 as unexplained investment u/s 69 r.w.r.t. 115BBE of the Act. We notice that during the course of search excess stock of gold weighing 6433.812 gms was found amounting to Rs. 1,41,75,568/-. Mr. Anoop Neema in his statement recorded or oath on 16,12.2016 u/s 132(4} of the Act accepted the value of excess stock as additional business income for financial year 2016-17. So far as, admission of undisclosed income of Rs. 1.41, 75,569/- is concerned there is no dispute at the end of both the parties. The bone of contention is that whether the provision of section 115BBE of the Act are applicable on the surrendered income of Rs. 1,41,75,568/- we find that Ld. CIT(A) on examination of the fact, settled judicial precedence, also appreciating that the alleged income is business income earned by the assessee during Cha normal course of its business and was part of the total business stock available at the business premises and also observing that provisions of section 115BBE of the Act are applicable from 01.04.2017 and are thus not applicable on the case of assessee as the search was carried out on 15,12.2016 observing as follows: • Hon’ble ITAT, Rajkot Bench in the case of Uniroyal Sthapatya v. PCIT vide its order in ITA 71/Rjt/2022 dated 20.12.2022 has held: 6. We have heard the rival contentions and perused the material on record. In our considered view, in the instant set of facts, if cannot be held that the order passed by the AO is erroneous and prejudicial to the interests of the Revenue. From the records, it is evident that the AO issued a specific show cause notice seeking explanation from the assessee as to why in the instant set of facts the provisions of section 69A/69C should not be invoked and consequently, why tax should not be imposed under section 115BBE of the Act of the act. Further, the assessee also filed a detailed reply in response to the aforesaid show cause notice and upon consideration of the same, the reply of the assessee was accepted by the AO. Further we observe that the Indore ITAT in the case of DCIT v. Punjab Retail private Ltd. in ITA number 677/Ind/2019 has held that since applicability of section 115BBE of the Act of the Act was amended with effect from 15-12- 2016, it will not apply to search/survey conducted prior to 15- l2-2016. Further, the Gauhati Tribunal in the case of Abdul Hamid v. ITO 83 35 ITA No. 1195/JP/2024 Jagdish Kumar Arora ITD 711 (2020) held that assessment order could not be held to be erroneous and prejudicial to the interest of' the revenue on account of non-invocation of section 115BBE of the Act. In the case of Balvinder Singh v. PCIT in ITA number 570/Del/2022 dated 22-08-2022, the Delhi ITAT observed as below: 9. And amendment has not brought in section 115BBE of the Act w.e.f. 2017-18 but the same was not therein the Statute on the date of survey. Taking a leaf out of amended provisions, the PCIT was of the opinion that the tax rate should have been 60% instead of 30% because of which the assessment order has become prejudicial to the interest of the revenue. 10. The mode point is whether the amendment is prospective or retrospective, as on the date of survey, the amended provisions were not there in the statute. In our considered opinion, this is a highly debatable issue, which cannot be subject matter of exemption of jurisdiction under section 263 of the act. Moreover, a perusal of the assessment order clearly shows that the assessing Officer has nowhere Invoked the provisions of section 68/69 of the act to impute the tax rate of section hundred and 15BBE of the act. The above matter is directly covered by the recent decision of this Hon’ble bench in the case of DCIT v/s Sh. Ram Narayan Birla in ITA No. 482/Jp/2015 dt. 30.09.2016, where the Hon’ble Bench at page 4 in para 4.3 held that “Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs.77,66,887/- was found in respect of gold and silver jewellery. The coordinate Bench in the case of Chokshi Hiralal Maganlal v/s DCIT 131 TTJ (Ahd)1 has held that in a case where source of investment/ expenditure is clearly identifiable and alleged undisclosed assets has no independent existence of its own or there is no separate physical identity of such investment/ expenditure then first was to be taxed is the undisclosed business receipts invested in unidentifiable unaccounted assets and only on failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not in the books of account and its nature and sources is not identifiable. Once such excess investment is taxed as undeclared business receipts then taxing it further as deemed income u/s 69 would not be necessary. Therefore, the first attempt of the AO should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipts under the particular head. It is observed that there is no conflict with the decision of Hon'ble Gujrat High Court in the case of Fakir Mohd. Hajihasan(Supra) wherein investment in an assets or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any head. Therefore, the Hon’ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as 36 ITA No. 1195/JP/2024 Jagdish Kumar Arora undeclared business income explaining the investment. In the present case stock was part of the stock. The revenue has not pointed out that excess stock has any nexus with any other receipts. Therefore we do not fine any fault with the decision of the ld. CIT(A) directing to the AO to treat the surrendered amount as excess stock qua the excess stock.” The principal of the above judgment is also applicable in the present case. Reliance in this regard is placed on the judgment in the case of Daulat Ram Rawatmull vs. CIT [1967] 64 ITR 593, wherein Calcutta High Court held as under: “ 59/61. In the instant case the assessee is a firm formed for the purpose of carrying on business. There is nothing on record to show that the firm had any source of income other than business. Therefore, in our opinion, it is not unreasonable to hold that any amount representing secret income arose out of business of the firm.” 7.6 Further, in the present case after considering the true and correct fact of the case, the provisions of section 69 cannot be invoked and the sundry debtors has to be treated as business or profession income of the assessee. Admittedly, in the present case, no existence of evidence in relation to any unaccounted independent identifiable other investment which was found during the course of survey. It is also admitted fact the appellant admittedly is engaged in business from past many years. The sundry debtors, if any found during the course of survey was of business or profession only and that too on account of the suppressed profits/income of business/profession over the years. The sundry debtors and excess cash have not been separately identified and the undisclosed income of past years if any was invested in same business in the form of sundry debtors. Under such circumstances, the sundry debtors if any cannot be separated from the total of business/profession either recorded or not recorded in the books of accounts. So, the investment in sundry debtors is part and parcel of business only. Further in the present case the ld. AO nowhere proved nor placed any material evidence on the records from, which it can be inferred that the sundry debtors found was not part of business but the other known sources. The ld. AO has based his case just on assumptions and presumptions without bringing on records any positive evidence or cogent reason in support of his observations as the sundry debtors was not part of business though found at business premises only. It is also the settled legal position that no addition can be the basis of suspicion, assumptions’ and presumption. An allegation remains a mere allegation unless proved. Suspicion may be strong however cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All).Also refer CIT v/s KulwantRai 291 ITR 36( Del). In CIT v/s Shalimar BuildwellPvt Ltd 86 CCH 250(All). And in the present case the ld. AO invoked 37 ITA No. 1195/JP/2024 Jagdish Kumar Arora provision of sec. 115BBE merely on suspicion which was not desirable in the eye of law and invoking provision of section 69 invalid ignoring the true and correct facts of the case. The provision of section 69 cannot be made applicable as primary condition for invoking of the provision is that the assets should be separately identifiable and it should have independent physical existence of its own. Since sundry debtors is a result of suppression of profit from business over the years and has not been kept identifiable separately, the investment in the sundry debtors has to be treated as business income. Once sundry debtors is treated as business/profession income (although not denied by the AO and no comments thereon) then provision of Sec. 115BE is not applicable. Hence the provisions of Sec. 115BBE so applied by the Ld. AO is not justified hence deserves to be deleted. 8. Affidavit wrongly rejected by the ld. CIT(A): As at the time of recording of statement there was no issue regarding the rate of taxes nor any provisions at that time that the tax rate shall be charged at higher rate on which the ld. AO taxed. Hence during the course of appellate hearing assessee has filed the affidavit in support of his statement given during the course of survey. The ld. CIT(A) has not rebutted the affidavit filed by the assessee, rather rejected by taking wrong misinterpretation and the contention made in the letter of affidavit should be accepted as truth unless rebutted. Because these affidavits have not been rebutted by lower authority by bring any contrary evidence or without examining. It is very settled legal position that in the cases where affidavit has been filed yet the contents thereof have not been rebutted by the AO/authority, the facts mentioned therein have to be read as the facts binding upon the Income Tax authorities. Kindly refer Mehta Pareek& Co. 30 ITR 181 (SC), ITO v. Dr. Tejgopal Bhatnagar 20 TW 368 (Jp) Paras Cotton Company vs. CIT (2003) 30 TW 168 (JD)., CIT v/s Lunard Dimond Ltd. 281 ITR 1 (Del). Recently in CIT v/s Bhawani Oil Mills (P) Ltd 239 CTR 445/49 DTR 212(Raj.)- It has been held that contents of affidavit could not be treated as of a lesser importance than the statement given by the creditor before the AO. Recently this Honble ITAT in the case of Narayani Bai Dangi v/s ITO Ward 2(1), Udaipur in ITA No.22/Jodh/2022 dt.13.10.2023 it has been held that we respectfully relied on the order Mehta Parikh & Co, (supra). The revenue has not acted in proper manner to verify the nature of land and had not confronted the affidavit filed by assessee. The ld. DR was unable to submit any contrary judgment against the submission of the assessee. In our considered view, the revenue has not taken any pain to complete the verification or has not confronted the affidavit of the assessee during the appeal stages. So, the ground of the assessee is accepted by the bench. We set aside the appeal order and the addition amount to Rs. 15,53,112/- is quashed 9. Observations and finding of the ld. CIT(A) is far from the assessment order and issues: On perusal of the order of the ld. CIT(A) it is noted that he made all to 38 ITA No. 1195/JP/2024 Jagdish Kumar Arora different observation or issues in his order, which were not raised or questioned by the ld. AO. For example the ld. AO has not stated that these are not sundry debtors, not sated that these are cash advances, not doubted nor observations on the nature of transactions in dairy nor on sources of amount, observations of the ld. CIT(A) was not the subject matter of the assessment order and issue. Then how the ld. CIT(A) can proceeded on different issues or observations, which were neither part of the assessment order nor any dispute raised by the ld. AO on the same. When there was no case of cash advances then why the ld. CIT(A) is saying it cash advances repeatedly. Hence the order of the ld. CIT(A) on wrong issues and wrong observation is liable to be quashed 10. Alternatively and without prejudice to above it is also submitted as under: Wrongly applied the provisions of Sec. 115BBE and charging the tax rate at higher side with retrospective effect and others. 10.1 Gross breach of principal of promissory or contract: The survey team has not stated at the time of survey that in future the tax rate shall be at the rate of 60% +25% Surcharges + 3% cess. The assessee has surrendered the income on the basis of rate of tax applicable or privileged at that time i.e. on the date of surrender on04/05.07.2016. And it was not know by the assessee or by any other person that after the surrender, from the December 2016 the tax rate shall be changed under these circumstances. The surrender made by the assessee firm at rate of tax applicable on the date of surrender on 05.07.2016 as a promise and contract between the assessee and department. And the department accordingly had taken the cheques of advance tax from the assessee firm of that tax on surrender amount. Thus the assessee firm has honestly fulfilled his promise while filling the ITR in which assessee has paid the entire tax i.e. assessee has honoured the surrendered. Assessee has not departed from his promise and contract. Now the department has breached from its promise or contract i.e. it is the breach of promissory or contract. The department has backed from his stands after 3 years +3 months from surrender and after 2 years from the filling the ROI before the 03.10.2019 the department has not given any notice or his views and kept to the assessee in dark by taking misinterpretation of the Second amendment of Sec. 115BBE. While if we look in Section 294 of the I.T. Act as above it is the invalid illegal action of the ld. AO. It is was the duty of the revenue to inform to the assessee just immediately the amendment in December 2016 by stating that you (assessee) had given the advance tax cheques and made the surrender at the rate of 30 tax + SC but now the law has changed and you (assessee) should give the more cheque of advances tax cheque or return should be filed at the tax rate as per new law. When a party is departing from his contract by one and other reasons then it was the onerous duty of him to give the notice before taking any action by them. As the assessee as per his/it promise has declared the surrender income in the return in the return filled on dt. 06.11.2017,while the amendment act has come in December 2016, if the Revenue had given the notice to the assessee before filling the return of income, the assessee could have not shown this income and he 39 ITA No. 1195/JP/2024 Jagdish Kumar Arora could have also claimed the unrecorded expenses against this unrecorded income and the tax can be charged on the net income. Hence a poor assessee should not have been suffered. 10.2. Clear violation of the Section 294 of the Act is provides as under:- Section 294 of the I.T. Act to have effect pending legislative provision for charge of tax If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income- tax 1 ] for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force. In the present case on the 1st of April 2016 (which is First day of April of A.Y. 2017- 18) Amendment provisions of Sec. 115BBE has not been made for A.Y. 2017-18. Hence the amended provision in December 2016 is not applicable for the A.Y. 2017-18 as per clearly provided in the Act itself and still there is no change in the provision. And very important to note that in this provision itself provided whichever is more favourable to the assessee, were actually in force. Thus the favourable rate of charging the tax was 30% not 60% +25% +cess. 10.3 Not applicable retrospective effect: Further, it is submitted that the amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act,2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore, not applicable to the survey operation conducted in case of the assessee on 4thand 5thof July, 2016.It is submitted that the tax laws as the Taxation(Second amendment) Act, 2016 was amended on15.12.2016 and received the ascent of President of India on the said date. It is submitted that though the amendment was applicable for assessment year2017-18 but only on income referred to in said section pertaining to the date after15.12.2016. As in case of the assessee, the unrecorded sundry debtors was found on 4th and 5th of July,2016 and accordingly at the material time, old provisions of section115BBE are applicable. It was accordingly submitted that the amendment provisions are not retrospective in operation and are not applicable in the present case and has been wrongly invoked by the Assessing Officer under proceedings initiated u/s143(3)/154 of the Act .In support, the reliance was placed on Hon’ble Supreme Court decision in case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala[1966]60ITR262(SC). Also refer CIT v/s Scindia Steam Navigation Co. Ltd. 42 ITR 589(SC). 10.4 The same was also decided in favour of assessee in following High Courts and Supreme Court decision. (i) The Assessing Officer has failed to appreciate and Consider that it is a settled proposition of law that legislations which modify accrued rights or which impose obligations or imposed new duties or attach a new disability have to be 40 ITA No. 1195/JP/2024 Jagdish Kumar Arora treated as prospective. This is so held by the Hon’ble Supreme Court in case of CIT v. Vatika Township Private Limited (2014) 109 DTR 33 where the Hon'ble Court has given the following finding for deciding whether a provision has prospective operation or retrospective operation: “39(e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz. understanding of CBDT itself regarding this provision. It is contained in CBDT circular No.8 of 2002 dated 27th August, 2002, with the subject “Finance Act, 2002 — Explanatory Notes on provision relating to Direct Taxes’. This circular has been issued after the passing of the Finance Act, 2002, by which amendment to Section 113 was made. In this circular, various amendments to the Income Tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, explanation to Section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BBE, would be prospective i.e. it will take effect from 1st June, 2002. Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub- section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: “Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act.” “Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act. ” Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion at the proviso to Section 113, is clearly a substantive provision and hence is to be construed prospective in operation. The amendment neither purports to be merely clarificetory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove ’hardships’ only of the assesee, not of the Department. On the contrary, 41 ITA No. 1195/JP/2024 Jagdish Kumar Arora imposing a retrospective levy on the assesses would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from 1.6.2002. 40. The aforesaid discursive of ours also makes it obvious that the conclusion of the Division Bench In Suresh N. Gupta treating the proviso as clarificatory and giving it retrospective effect is not a correct conclusion. Said judgment is accordingly overruled.” (ii) Ansal Housing and Construction Ltd. vsACIT (2016) 389 ITR 373, Delhi HC. (iii) Vodafone International Holdings v. UOI (2012) 6 SCC 613 (SC) (iv) Sony Ericsson Mobile Communication India Pvt. Ltd. CIT (2015) 374 ITR 118 (Delhi) (v) CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 (SC) vi) (vi) CIT v. Ansal Land Mark Township (P) Ltd. (ITA 160/2015 dated 28.05.2015 Delhi High Court) (vii) CIT v. NGC Network India Pvt. Ltd. (ITA No. 397/2015 dated 29th January 2018) (viii) CIT v. M/s Revathi Equipment Ltd. [2008] 298 ITR 67 (Mad) 4.8. That Rajasthan High Court has also decided in the case of Niharika Jain w/o Sh. Andesh Jain vs. Union of India in Sb. Civil Wirt Petition No. 2915/2019 and other dt. 12.07.2019 that Benami Amendment Act, 2016 cannot have retrospective effect. It was decided that court has no hesitation to hold that the Benami Amendment Act, 2016 amending the principal Benami Act, 1988 enacted w.e.f. 1st November, 2016 i.e. the date determined by the Central Govt. in its wisdom for its enforcement, cannot have retrospective effect. In the case of Shri Hari Narain Gattani vs. DCIT in ITA No. 186/JP/2020 9th October, 2020 (2021) 186 ITD 0434 (Jaipur-Trib). It has been held that “If we look at the provisions of section 115BBE, it provides that where the total income of the assessee includes any income referred to in section68, section69, section69A, section69B, section69 Corsection 69D ,the income tax payable shall be at the rate of 30% on income so referred in said sections. Further, in terms of amended provisions of section 115BBE by the Taxation Laws (Second Amendment Act), 2016, it provides that where the total income of the assessee includes any income referred to in section68, section69, section69A, section69B, section69C or section69D and reflected in the return of income furnished under 42 ITA No. 1195/JP/2024 Jagdish Kumar Arora section139 or the total income of the assessee determined by the Assessing Officer includes any income referred to in section68, section69, section69A, section69B, section69C or section69D, if such income is not reflected in the return of income furnished under section139 of the Act ,the income tax pay able shall be at the rate of 60% on income so referred in said sections. Thus, both the pre- amended and post-amended provisions of section 115BBE talks about the income referred to in section68, section69, section69A, section69B, section69C or section69D. The change which has been brought about in the provisions relates to income so referred in aforesaid provisions so defined which is either reflected in the return of income or determined by the Assessing Officer and in both cases, it will be covered by the provisions of section 115BBE of the Act and rate of taxation has been increased from 30% to 60% on such specified income. There is therefore nothing stated in either the pre-amended or post-amended provisions of section 115BBE that where the assessee surrenders undisclosed income during the search action for the relevant year, the tax rate has to be charged as per provision of section 115BBE of the Act. Reliance is also placed on the Judgment of the Hon’ble Income Tax Appellate Tribunal, Jaipur Bench in the case of The Assistant Commissioner of Income Tax, Central Circle-2, Jaipur Vs M/s Sanjay Bairathi Gems Limited in ITA No. 157/JP/2017 wherein their Lordships have held that the excess stock found during the course of survey is a part of the business income and the case laws relied upon by the AO is not applicable and the additional income declared by the assessee is not liable to tax as per the provisions of section 115BBE of the Act. Further the reliance is also placed on the judgment of the Hon’ble’ble Apex Court in the case of CIT Vs M/s Vatika Township Private Limited reported in 367 ITR page 466 wherein it has been held that it is a settled law that any amendment which increases the tax burden of the assessee has to be considered prospective and not retrospective. Also, the legislations which modify accrued rights or which impose obligations or which impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. It further held that “If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subject as against there the revenue, has to be preferred.” Recently the Hon’ble Supreme Court in the case of M.M. AQUA TECHNOLOGIES LTD. VERSUS COMMISSIONER OF INCOME TAX, DELHI-III CIVIL APPEAL NOS.4742-4743 OF 2021 (Arising out of SLP (Civil) Nos. 35883- 35884 of 2016) Dated: - 11 August 2021 Held that a retrospective provision in a tax act which is “for the removal of doubts” cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International Drill. Inc. v. CIT, (2005) 12 SCC 717 as follows: 43 ITA No. 1195/JP/2024 Jagdish Kumar Arora As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].)An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are “it is declared” or “for the removal of doubts”. There was and is no ambiguity in the main provision of Section 9(1)(ii). It includes salaries in the total income of an assessee if the assessee has earned it in India. The word “earned” had been judicially defined in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income “arising or accruing in India”. The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that judicial definition so as to include with effect from 1979, “income payable for service rendered in India”. When the Explanation seeks to give an artificial meaning to “earned in India” and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively. This being the case, Explanation 3C is clarificatory – it explains Section 43B(d) as it originally stood and does not purport to add a new condition retrospectively, as has wrongly been held by the High Court. Third, any ambiguity in the language of Explanation 3C shall be resolved in favour of the assessee as per Cape Brandy Syndicate v. Inland Revenue Commissioner (supra) as followed by judgments of this Court – See Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 at paras 60 to 70 per Kapadia, C.J. and para 333, 334 per Radhakrishnan, J. The High Court judgment dated 18th May, 2015, is clearly in error in concluding that ‘interest’, on the facts of this case, has been converted into a loan. There is no basis for this finding - as a matter of fact, it is directly contrary to the finding on facts of the authorities below. The principal is also applicable in the present case 44 ITA No. 1195/JP/2024 Jagdish Kumar Arora . Full Bench of Hon’ble Patna High Court in case of Loknath Goenka v. CIT (2019) 417 ITR 521 with reference to insertion of section 64(1)(iii) w.e.f. 01.04.1976 held that the tax liability under the said provision could be charged on the assessee in the assessment in the assessment which was to be made for that accounting year i.e. 1976-77 which would be done in A.Y. 1977-78 as the amending act introducing a new tax liability which came into force w.e.f. 01.04.1976 could not be given a retrospective effect and be made applicable to assessment year 1976-77. The relevant part of the judgment reads as under: “2. The point for consideration in the reference is whether the Appellant Tribunal was correct in law in holding that the share income of minor sons of the assesses, including the share in interest on capital credited to the minor sons out of the partnership firm was to be computed in the hands of their father under Section 64(1)(iii) in the Assessment year 1976-77. The said provision was introduced in the income Tax Act by the Taxation Law (Amendment) Act 1975 with effect from 1.4.1976, whereas the accounting year of the assessee(s) in the instant case(s) came to an end on 10.08.1975 and on 31.12.1975 in Taxation Case No.126 of 1983 and Taxation Case No.28 of 1986 respectively. 17. Reading the judgment of the Apex Court in the case of Kesoram Industries and Cotton Mills Ltd. as Wealth Tax Commissioner (Central), Calcutta AIR Y966 SC 1370 harmoniously with the Constitution Bench judgment of the Apex Court in the case of Karimtharuvi Tea Estate Ltd AIR 1966 SC 1385, this Court would observe that the argument advanced by Counsel for the assessees (Amicus Curriae) as well as the Department can be made only in respect of a rate prescribed under a Finance Act or an Act providing a surcharge if the same is brought into force on the 1st of April of the assessment year in which assessment for the previous year is being done as the same would only provide for ascertaining the rate, for existing liability under the Income Tax Act. But that is not the case here. Under the new provision, i.e. Section 64(1}(iii) a new liability has been prescribed and not the rate for ascertaining the liability. Such new liability under the Income Tax Act cannot be given a retrospective effect. Such liability can only be fastened on an individual If the same was existing at the time of accrual and not at the time of assessment. The observations of the Apex Court in paragraph 33 of the judgment in the case of Keshoram Industries and cotton mills (supra), clarifies this position. 18. In view of the judgments of the Apex Court in the case of Keshoram Industries (supra) as well as Karimtharuvi Tea Estate Ltd (supra) this Court would have no hesitation in holding that for deciding the Iiability of a particular provision of the Income Tax Act, the date of accrual of income would be relevant. If the provision comes into force in a particular financial year, it would apply to the assessment for that year but cannot be made applicable in respect of assessment for a previous year. 11. The Assessing Officer has failed to appreciate and consider that Taxation Laws (Second Amendment Act), 2016 also inserted a new sub clause (1A) to 45 ITA No. 1195/JP/2024 Jagdish Kumar Arora section 271AAB whereby the liability of penalty in case of searches was increased. However, this clause was specifically made applicable only where searches has been initiated on or after the date on which the Taxation Laws (Second Amendment Act) Bill, 2016 receives the assent of President and thus this clause was specifically made effective only where the searches took place on or after 15.12.2016. Section 115BBE inserted by the same Amendment Act is specifically made effective from 01.04.2017. Thus, from the analogy of section 271AAB it is evident that section 115BBE is also applicable where income referred to in that section is assessed on or after 01.04.2017 i.e. AY 2018-19. Hence the substituted section 115BBE is not applicable for AY 2017-2018. 6. Under identical facts various other Tribunals have held that invocation of higher rate of tax is not proper. Reliance is placed upon: • Hon'ble ITAT, Indore Bench in the case of DCIT v. Punjab Retail Pvt. Ltd. vide its order in ITA 677/Ind/2019 dated 08.10.2021 has held: 14. if is also a fact that the Ld. AO has not brought on record any evidence or material to establish that the assessee was involved in any other activities or having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT(A) observed as follows: “First of all let me discuss whether the provisions of section 15BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that ”An amendment made to the taxing statute can be said Io be intended to remove ’hardships’ only of the assessee, not of the department-on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon'ble ITAT Indore in the case of Priyadharshani Construction vs ITO (2012) 19 ITJ 276 (Trib- Indore) has held that \"Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Thus, it is settled position of law that provision of section 115BBE of the Act is clearly not applicable in case of business income which is taxed under section 28 to 44 of the Income Tax Act. The assessing officer also failed to bring on records any other source of income of the appellant apart from the one that is show^i in return of income. In view of above facts and circumstances of the case it is respectfully prayed that section 69 of the Income Tax Act 1961 read with section 115BBE is not applicable to the facts of the case of the assessee and the disserve to be delete. • Hon’ble Jodhpur bench of ITAT in the case of Lovish Singhal & Others vs ITO (Appeal No 143/ Jodh/ 2018); 46 ITA No. 1195/JP/2024 Jagdish Kumar Arora • Hon’ble Jeipur bench of ITAT in the case of DCIT vs Ramnarayan Borla [Appeal No 482/ JP/ 2015 dt 30-09-2016), • Hon’ble Supreme Court in the case of Lakhmichand Baijnath Vs CIT as reported in 35 ITR 416,' • Hon'bte Apex Court in the case of Nalini Kant Ambalal Mody vs SAL Narayan Row as reported in 61 ITR 428. Prayer: In view of the above facts, circumstances of the case and legal position of law the higher rate of tax so charged i.e the excess demand so raised may kindly be deleted, the provisions of sec. 115BBE may kindly be held not to applicable in this case and the assessment order may kindly be quashed and oblige.” 6. In support of the contention raised in the written submission the ld. AR of the assessee placed on record the following evidence / records : S.No. Particulars Page No. Before AO OR CIT(A) 1. Copy of ITR for the year. 1 AO & CIT(A) 2. Copy of E-proceedings. 2-5 AO & CIT(A) 3. Copies of all the notices u/s 143(2) and 142(1) 6-18 AO 4. Copy of letter to AO dt. 06.11.2019 And other 19-28 AO & CIT(A) 5. Copy of statement of assessee recorded u/s 133A 04.07.2016. 29-33 AO & CIT(A) 6. Copy of Seized Dairy. 34-35 AO & CIT(A) 7. Copy of Affidavit of assessee 36-38 CIT(A) 8. Copy of Written Submissions filed to the CIT(A) 39-60 CIT(A) 9. Copy of Assessment order in the case of M/s Silver Wings Life Spaces. 61-69 AO 7. In support of the grounds so raised, ld. AR for the assessee vehemently argued that a survey was conducted wherein a diary was found 47 ITA No. 1195/JP/2024 Jagdish Kumar Arora wherein entry of debtor was found for an amount of Rs. 2,05,00,000/- which was not recorded in the books of accounts of th easessee. The assessee disclosed that income for the year under consideration and had paid the tax in accordance with the law. The assessee group concern M/s. Silver Wings Life Spaces wherein the similar issue was dealt with the co-ordinate bench wherein it was held that amount surrendered by the assessee at the time of survey could not be subjected to tax under the deeming provision of section 68,69,69A of the Act, when the source and nature of the income had not been disputed. 8. Per contra, ld. DR has relied upon the findings of the Assessing Officer as well as that of ld. CIT(A), and submitted that the income that has been disclosed by the assessee in the ITR is undisclosed income and the same was disclosed only before the survey team. The ld. DR also argued that the assessee had deposited the Specified Bank Notes [ SBN ] for higher amount and the assessee cannot take the benefit of the normal rate of the amount deposited in SBN. The case of the assessee was selected to verify that aspect only and thereby the ld. AO corrected added income as chargeable to special rate of tax. The filing of an affidavit will not help the assessee for paying appropriate rate of tax. The assessee could not file the details of the nature of income and source of income he merely disclosed 48 ITA No. 1195/JP/2024 Jagdish Kumar Arora amount as debtor and therefore, ld. DR relied upon the finding recorded in the orders of the lower authority. 9. In the rejoinder to the contention of the ld. DR, AR of the assessee stated that the revenue in the survey proceeding did not ask a single question as to the source and nature of income and the assessee had income that income as surrender in the statement. Once the income is accepted by the revenue in the statement no new case can be developed by the revenue. The ITR was already filed and that income so disclosed already accepted. Further at the time of the declaration of income there was no amendment to section 115BBE of the Act and therefore, the assessee cannot be made liable to pay tax at a higher rate. 10. We have considered the rival contentions and perused the material on record. Ground no. 2.1, 3.1 and 3.2 raised by the assessee raised by the assessee challenges the finding of lower authority as to the income disclosed during the survey falls within the meaning of section 69 & 69A of the Act or not, and as to whether the same is to be charged to tax at normal rate or the rate as prescribed u/s. 115BBE of the Act. The brief facts related to the dispute is that the assessee is a doctor and runs the hospital in the name of JK Hospital at Bhawanimandi. Besides this he is also engaged into the business of real estate and developers. In the assessment proceeding 49 ITA No. 1195/JP/2024 Jagdish Kumar Arora the ld. AO noted that the assessee had disclosed unexplained investment in the form of sundry debtors at Rs. 2,05,00,000/- during the survey conducted on 04.07.2016 based on the diary found. The receipt from sundry debtors had been credited in the cash book till 25.08.2016 and the cash balance was available at Rs. 51,99,631/- in the books as on 08.11.2016. Out of that cash on hand available he had deposited Rs. 50,00,000/- in old currency notes during the demonetization period. Ld. AO noted that the assessee had not disclosed that undisclosed sundry debtor u/s 69 of the Act and had not paid tax in accordance with section 115BBE of the Act. After examination the reply and documents submitted by the assessee, the assessment proceedings were concluded accepting the return of income but while doing so ld. AO considered that income disclosed on account of debtors recorded in the diary as income chargeable to tax as per provision of section 69 of the Act and charged tax in accordance with the provisions of section 115BBE of the Act. The bench noted in the survey proceeding neither the question as to source or the details of the debtors were asked, the assessee on being questioned offered the income for the current year and the same has been accepted and not question was raised about the year of earning that income and thereby the accounted as debtors of the assessee. Since that finding is missing from the time of survey till the 50 ITA No. 1195/JP/2024 Jagdish Kumar Arora completion of the assessment proceeding. Without bringing anything contrary ld. AO could not charge that income chargeable to tax as per provision of section 69 of the Act. Ld. AR of the assessee relied upon the decision of the co-ordinate bench in the case of Silver Wings Life Spaces in ITA no. 511/JP/2024 wherein the bench held that : 11. As is evident from the findings recorded by ld. AO, he had discussed the provisions of section 69 & 69A and then proceeded to levy higher tax as per provision of section 115BBE of the Act. The assessee vide letter dated 06.11.2019, copy made available to us by Learned AR in the course of arguments, claimed that the income so disclosed was of the project, which had just started during the year under consideration and further that the amounts shown to have been received from the various parties as booking money. The facts so presented by the assessee were not further enquired by the ld. AO. Ld.AO neither examined the list nor raised a single question about the explanation furnished by the assessee as to the details of the source and nature of income earned. Ld. AO did not dispute the source of such income while also verifying the source of amount deposited into the bank account. So, once the Revenue accepted the income disclosed in the ITR filed source of which was collection from the sundry debtors of the business of assessee firm and said income stands already taxed accepting the source as income arising out of the project, same could not be considered as unexplained investment. Section 69 of the Act reads as follows: “Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” 12. In the given set of facts, it is not a case of investment of the abovesaid amount by the assessee, and rather, as per list prepared by the assessee, a case of receipt of the amounts from the sundry debtors, which was offered for tax as regular income of the assessee firm. Said claim of the assessee was not disputed or challenged, and furthermore, there is no further evidence adverse to said claim 51 ITA No. 1195/JP/2024 Jagdish Kumar Arora raised by the assessee. Therefore, it cannot be said to be a case where provisions of section 69 come into application. Similar issue has been decided by the co-ordinate Bench of ITAT, Chandigarh Benches, Chandigarh in the case of Montu Shallu Knitwers vs. DCIT, in ITA No. 21/Chd/2023, on December 1, 2023. Therein, it has been held as under:- “18. We have heard the rival contentions and purused the material available on record. The AO has invoked the deeming provisions of section 69B and brought to tax excess stock found during the course of survey which is under challenge before us. It is a settled legal proposition that there is difference between the undisclosed income and unexplained income and the deemingprovisions are attracted in respect of undisclosed income however, the condition before invoking the same is that the assessee has either failed to explain the nature and source of such income or the AO doesn’t get satisfied with the explanation so offered by him. 19. In particular, for the deeming provisions of section 69B to be attracted in the instant case, there has to be a finding that the assessee has made investments in the stock during the financial year and such investments are not fully recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO. Therefore, the explanation so offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee needs to be analysed and examined to draw necessary conclusions in this regard. 20. For the purposes, we refer to the statement so recorded of the one of the partners of the assessee firm during the course of survey on 29/08/2018. In Question no. 35, it was stated that during the course of survey proceedings u/s 133A, physical verification of stock lying in the business premises was done with the help of person deputed by the assessee and after physical verification, it comes to Rs 1,94,48,494/- whereas as per provisional trading account submitted by your accountant, the stock as on today is Rs 1,34,48,922/- so there is a difference of Rs 59,99,572/- in the stock and the assessee was asked about the difference in stock found and recorded in the books of accounts. In response, the assessee submitted that purchase bills amounting to Rs 10,04,572/- are yet to be entered in the system against which goods have already been received and for the remaining difference, he sought time to explain after consulting with the accountant. We find that the stock physically found has been valued and then,compared with the value of stock so recorded in the books of accounts and the difference in the value of the stock so found belonging to the firm has been offered to tax. There is thus no dispute that there is a commonality in the stock so found and as recorded in the books and in absence of which, the comparison would not have been possible and difference would not have been worked out. The Revenue has not pointed out that the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. There is thus a clear nexus of stock physically so found with the stock in which the assessee regularly deals in and recorded in the books of accounts and thus with the business of the assessee and the difference in value of the stock so found is clearly in nature of business income. The statement of the partner of the assessee firm is available on record and related documents so found during the course of survey are stated to be in possession of the Revenue authorities. Apparently, the AO has failed to take into consideration the statement of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Further, in the surrender letter dated 30/08/2018, the assessee has stated that during the course of survey operations, certain discrepancy out of excess stock of Rs 50 lacs has been found and to purchase piece of mind and to avoid litigation, they offer additional business income of Rs 50 lacs out of excess stock found out of their normal business income for the current financial year 2018-19 over and above normal business income. We therefore find that the nature and source of such unaccounted stock is nothing but arising out of 52 ITA No. 1195/JP/2024 Jagdish Kumar Arora assessee’s business operations. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee’s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69B of the Act. 21. In case of Fashion Fashion World Vs. ACIT (IT Appeal No. 1634(Ahd.) of 2006, dt. 12/02/2010), the Coordinate Ahmedabad Benches has held as under: “11. But this does not mean that loss computed under any of the five heads mentioned in section 14 – (i) ‘salary’, (ii) ‘income from house property’, (iii) ‘profits and gains from business or profession’, (iv) ‘capital gains’ and (v) ‘income from other sources’ – cannot at all be adjusted against unexplained investment or expenditure. What is necessary as per Hon. Gujarat High Court is that source of acquisition of asset or expenditure should be clearly identifiable. In the case before Hon. Gujarat High Court the source of gold confiscated was not identifiable and hence adjustment was not permitted. 12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs.25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the assessee and sought to tax the difference between book-stock and physicalstock as unaccounted investment under section 69 without considering the claim of the assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 13. Thus in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is only where no nexus is established with any head then it should be considered as deemed income under section 69, 69A, 69B & 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69, 69A, 69B & 69C as the case may be. It should not be done at the first instance without giving opportunity to the assessee to establish nexus. Therefore, 53 ITA No. 1195/JP/2024 Jagdish Kumar Arora there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. 14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head ‘business’. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only.” 15. In view of the above, AO is directed to consider the sum of Rs.8,10,011/- as undisclosed business income assessable under the head ‘business’ and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO. 22. In the instant case as well, there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. 23. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head “Income from Business/profession” and apply the normal rate of tax. In the result, the appeal of the assessee is allowed.” 13. For the foregoing reasons and in view of the findings recorded by the co- ordinate Bench, the amounts surrendered by the assessee at the time of survey could not be subjected to tax under the deeming provisions of section 69 & 69A of the Act. When the source and nature of income had already been considered and accepted, the subject amounts were required to be subjected to tax at normal rate. Result 14. Resultantly, the appeal filed by the assessee is allowed and the impugned order passed by Learned CIT(A) is hereby set aside. 54 ITA No. 1195/JP/2024 Jagdish Kumar Arora On being consistent to the finding so recorded we decide Ground no. 2.1, 3.1 and 3.2 in favour of the assessee. Ground no. 1 is technical therefore, we have not decided this ground of the appeal of the assessee as we have considered on the merits of its case. Ground no. 4 being consequential for levy of interest and ground no 5 being general in nature same is not adjudicated. Order pronounced in the open court on 11/02/2025. Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11/02/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Jagdish Kumar Arora, Bhawanimandi 2. izR;FkhZ@ The Respondent- DCIT, Central Circle, Kota 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File (ITA No. 1195/JP/2024) vkns'kkuqlkj@ By order, lgk;diathdkj@Asst. Registrar "
Other Referred Cases
M/s Silver Wings Life Spaces v/s DCIT Circle-01 Kota, Construction portal Pvt. Ltd V ITO, SAB Industries Limited V DCIT, Gavrish Steels (P) ltd V ACIT, Shri Ram Swarrop Sighal V ACIT Circle, Shri Ganga Nagar, PCIT vs. Bajargan Traders, Manmohansingh Vig v Deputy Commissioner of Income Tax, Dr. S.C. Gupta vs. CIT, Raj Hans Towers (P.) Ltd. v. Commissioner of Income-tax-V, Pebble Investment and Finance Ltd. vs. ITO, Fakir Mohmed Haji Hasan vs. Commissioner of Income-tax, Devi Prasad Vishwanath vs. Commissioner of Income-tax, Kale Khan Mohammad Hanif vs. Commissioner of Income-tax, M. Ganpathi Mudaliar vs. Commissioner of Income-tax, A. Govindarajulu Mudaliar vs. Commissioner of Income-tax, Navin Shantilal Mehta vs. ITO, Shri Ramnarayan Birla vs. ITO, Bajrang Traders vs. DCIT, Sham Jewellers vs. CIT, Sham Fashion Mall vs. ACIT, Suraj Bhan Oil (P.) Ltd vs. DCIT, SVS Oil Mills vs. ACIT, M/s Khurana Rolling Mills Pvt. Ltd. vs. DCIT, M/s. Sham Fashion Mall vs. ACIT, M/s. Arora Alloys vs. DCIT, Prashanti Surya Contruction Co. Pvt. Ltd. vs. ITO, Shri Hari Narain Gattani vs. DCIT, M/s. Khurana Rolling Mills Pvt. Ltd. vs. DCIT, M/s. Sham Fashion Mall vs. ACIT, M/s. Arora Alloys vs. DCIT, Prashanti Surya Contruction Co. Pvt. Ltd. vs. ITO, Shri Hari Narain Gattani vs. DCIT, M/s. Khurana Rolling Mills Pvt. Ltd. vs. DCIT, M/s. Sham Fashion Mall vs. ACIT, M/s. Arora Alloys vs. DCIT, Prashanti Surya Contruction Co. Pvt. Ltd. vs. ITO, Shri Hari Narain Gattani vs. DCIT
Laws Referred To
Income Tax Act
1:1 Consultation on Tax Litigation
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Guide to Charitable Trusts: Formation, Benefits, and Compliance
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1:1 Consultation on Salary Structuring
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Startup Dissolution Resolution
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Research Collaboration Agreement
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