NARAYANDAS KISHANDAS L/R SUNIL NARANG,SECUNDERABAD V. ACIT., CENTRAL CIRCLE-2(3), HYDERABAD

ITA 654/HYD/2022

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The case revolves around a search and seizure operation conducted under section 132 of the Income Tax Act, 1961, at the premises of Sri Narayanadas Kishnadas Narang, which led to the discovery of unaccounted cash amounting to Rs.89,18,100. The assessee, Sri Sunil Narang, legal heir of Sri Narayanadas Kishnadas Narang, admitted this amount as additional income in his return for the assessment year 2020-21, declaring it under the head 'income from business'. The Assessing Officer assessed this income under section 69A read with section 115BBE of the Act, treating it as undisclosed income. The first appellate authority upheld this decision. However, the Tribunal, referencing a similar case (ACIT Vs. Syed Zeeshanuddin), found that the income declared under 'income from business' should not be assessed under 'income from other sources' and thus not subjected to the higher tax rate under section 115BBE.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29014 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 26-11-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 21-11-2022
• Other Referred Cases: ACIT Vs.Syed Zeeshanuddin in ITA No.432/Hyd/2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Set aside; Business income; Search and seizure
• Section: 139(1); 68; 69A

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri K. Narasimha Chary, Judicial Member आ.अपी.सं /ITA No.654/Hyd/2022 (निर्धारण वर्ा/Assessment Year: 2020-21) Sri Sunil Narang Legal heir of Sri Narayandas Kishandas Hyderabad [PAN : ABFPN3762L] Vs. Assistant Commissioner of Income Tax Central Circle-2(3) Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri P.Murali Mohan Rao, AR रधजस् व द्वधरध/Revenue by:: Shri Srinath Sadanala, DR सुिवधई की तधरीख/Date of hearing: 26/11/2024 घोर्णध की तधरीख/Date of Pronouncement: 27/11/2024 आदेश / ORDER PER. MANJUNATHA G., A.M: This appeal filed by the assessee is directed against the order dated 30/09/2022 of the learned Commissioner of Income Tax (Appeals) [Learned CIT(A)]-12, Hyderabad relating to A.Y.2020-21. 2. The brief facts of the case are that the assessee is an individual, filed his original return of income u/s 139(1) of Income Tax Act, 1961 (“the Act”) on 15.02.2021, declaring total income of Rs.1,00,67,430/-. A search and seizure operation u/s 2 132 of the Act, was conducted on the assessee as part of the searches conducted on M/s Skill Promoters Pvt. Ltd. Group & others on 22.10.2019. During the course of search proceedings, at the residential premises of Sri Narayanadas Kishnadas Narang, cash amounting to Rs.89,18,100/- was found and seized. The assessee was called upon to explain the source of cash found and in response to Question.13 of statement recorded u/s 132(4) dated 22.10.2019, he has declared additional income of Rs.89,18,100/- towards cash found and seized during the course of search. Consequent to search, the assessee has filed the return of income on 15.02.2021 and declared total income of Rs.1,00,67,430/-, which includes additional income of Rs.89,18,100/- offered towards cash found during the course of search. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer assessed the additional income offered by the assessee towards cash found during the course of search u/s 69A r.w.s 115BBE of the Act. 3. The assessee carried the matter in appeal, before the first appellate authority but could not succeed. The Ld.CIT(A), for the reasons stated in the appellate order dated 30.09.2022, sustained the additions made by the Assessing Officer towards cash found during the course of search u/s 69A r.w.s. 115BBE of the Act. 4. Aggrieved by the Ld.CIT(A) order, the assessee is in appeal before the Tribunal. 3 5. The learned Counsel for the assessee submitted that the Ld.CIT(A) erred in upholding the reasons given by the Assessing Officer to invoke the provisions of section 115BBE of the Act, towards additional income offered in the return of income filed for the assessment year in question, which includes additional income declared towards cash found during the course of search, without appreciating the fact that the assessee has admitted the additional income under the head ‘income from business’ and also explained before the Assessing Officer that the cash found during the course of search was generated from his business activity. Learned Counsel for the assessee further submitted that this issue is also decided in favour of the assessee by the decision of ITAT Hyderabad in the case of ACIT Vs.Syed Zeeshanuddin in ITA No.432/Hyd/2022, where, identical issue has been considered by the Tribunal and held that income offered under the head ‘income from business’ cannot be assessed under the head ‘income from other sources’ and provisions of section 115BBE cannot be invoked. Therefore, he submitted that the additions made by the Assessing Officer and confirmed by the Ld.CIT(A) should be deleted. 6. Ld.DR on the other hand, supporting the order of the Ld.CIT(A) submitted that there is no dispute with regard to the fact that the appellant could not explain the cash found during the course of search. It is also an admitted fact that the appellant had offered additional income towards cash found during the course of search and also paid taxes, however, admitted additional income under the head ‘ income from business’ and paid taxes at normal rates, even though as per 4 the provisions of section 69A, if the assessee is found to be the owner of any money, which is not recorded the in books of account, if any maintained by him for source of income and the assessee offers no explanation about the nature and source of the money to the satisfaction of the Assessing Officer, then the money may be deemed to be the income of the assessee for such financial year. Therefore, when the appellant is not able to explain the source of cash found during the course of search, even if he admits the income from business in the return of income filed, the nature of income and explanation offered by the assessee cannot be altered and thus, the Assessing Officer has rightly assessed the additional income u/s 69A of the Act, and brought to tax u/s 115BBE of the Act, and thus, the orders of the Assessing Officer and the Ld.CIT(A) should be upheld. 7. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that during the course of search, cash amounting to Rs.89,18,100/- was found in the residential premises of the assessee. It is also an admitted fact that the assessee has admitted additional income of Rs.89,18,100/- for the A.Y.2020- 21 and also filed the return of income and paid relevant taxes applicable under normal rates of taxes. The Assessing Officer assessed the additional income offered by the assessee and admitted in the return of income, u/s 69A of the Act, and brought to tax u/s 115BBE of the Act, on the ground that, where the assessee found to be owner of any money, which is not recorded in the books of accounts if any, maintained by him 5 for the assessment year and the assessee offers no explanation or explanation offered by the assessee is not satisfactory to the Assessing Officer, then such money should be assessed u/s 69A of the Act. Further, once any income is assessed u/s 68 to 69D of the Act, then the same needs to be brought tax u/s 115BBE of the Act. It was the argument by the Learned Counsel for the assessee that although the appellant could not explain the source of cash found immediately during the course of search, but subsequently explained that the cash found during the course of search was generated out of business income and accordingly offered additional income under the head ‘income from business’. Further, the assessee, being an individual is not required to maintain books of accounts for the impugned assessment year and thus the question of recording the said cash in the books of accounts maintained by him if any, for the relevant assessment year does not arise. Therefore, merely for the reason that the assessee could not explain the nature and source of cash at the time of search, it cannot be said that said cash is generated from undisclosed source of income and can be taxed u/s 69A r.w.s.115BBE of the Act. 8. We find that although, the appellant could not satisfactorily explain the nature and source of cash found during the course of search, while recording statement u/s 132(4) subsequently, explained the source of the cash found during the course of search, out of income generated from his business. The appellant had also filed the return of income for the assessment year in question and admitted additional income under the head ‘income from business’. The Assessing 6 Officer never disputed these facts. However, ignored the explanation of the assessee with regard to the nature and sources of cash only on the ground that the assessee has admitted the additional income during the course of search and not explained the nature and source of cash found during the course of search. In our considered view, the assessee being an individual does not require to maintain books of accounts for his business activity. Once, the assessee is not required to maintain the books of accounts, then the question of recording cash in the books of accounts, if any, maintained by the assessee for the relevant assessment year does not arise. Since the assessee is not required to maintain books of accounts and further the assessee had also explained the nature and source of cash by filing the return of income, in our considered view, the Assessing Officer ought to have accepted the explanation of the assessee with regard to nature and source of cash. The Assessing Officer, without disbelieving the explanation of the assessee, simply assessed additional income u/s 69A and brought to tax u/s 115BBE of the Act. In our considered view, in order to invoke the provisions of section 115BBE of the Act, income referred to u/s 68 to 69D of the Act should be assessed. In the present case, although the Assessing Officer assessed additional income u/s 69A of the Act, but no reason has been assigned. Therefore, we are of the considered view that the Assessing Officer erred in taxing additional income, being cash found during the course of search u/s 69A, r.w.s.115BBE of the Act. The Ld.CIT(A), without appreciating relevant facts simply sustained the reasons given by the Assessing Officer to tax the cash found u/s 115BBE of the Act. Thus, we set aside the order 7 of the Ld.CIT(a) and direct the Assessing Officer to assess additional income of Rs.89,18,100/- as income from business as returned by the assessee and to compute tax under normal rates of taxes. 9. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 27th November, 2024. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (MANJUNATHA G.) ACCOUNTANT MEMBER Hyderabad, dated 27th November, 2024 L.Rama, SPS Copy to: S.No Addresses 1 Sri Sunil Narang, Legal Heir of Narayandas Kishandas, C/o P.Murali & Co., Chartered Accountants, 6-3- 655/2/3, Somajiguda, Hyderabad 2 The Assistant Commissioner of Income Tax, Central Circle- 2(3), Hyderabad 3 The Pr. CIT, Central Circle, Hyderabad 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order "