Appeal details
Counselvise Citation
[2024] 139 COUNSELVISE.COM (IT) 7661 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-10-2024
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
20-08-2024
Assessment Year
2019-2020
Appeal Filed On
28-06-2023
Judgement Text
"आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “बी” , च᭛डीगढ़ \nIN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH \n \nHEARING THROUGH: VIRTUAL MODE \n᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य \nBEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM \n \nआयकर अपील सं./ ITA NO.416/Chd/2023 \nिनधाᭅरण वषᭅ / Assessment Year : 2019-20 \n \n Rav Sharan Singh \n6, Ranjit Singh, Near State College \nPatiala-147001- Punjab \nबनाम \n \nThe Asst. CIT \nCentral Circle, Patiala \n᭭थायी लेखा सं./PAN NO: BVBPS5943M \nअपीलाथᱮ/Appellant \n \nᮧ᭜यथᱮ/Respondent \n \nिनधाᭅᳯरती कᳱ ओर से/Assessee by : \nShri Sudhir Sehgal, Advocate and \n \n \n \n \n \nShri Rishabh Marwah, C.A \nराज᭭व कᳱ ओर से/ Revenue by : \nShri Dharam Vir, JCIT, Sr. DR \n \nसुनवाई कᳱ तारीख/Date of Hearing : \n20/08/2024 \nउदघोषणा कᳱ तारीख/Date of Pronouncement : 30/10/2024 \n \nआदेश/Order \n \nPER VIKRAM SINGH YADAV, A.M. : \n \nThis is an appeal filed by the Assessee against the order of the Ld. CIT(A)-5, \nLudhiana dt. 24/05/2023 pertaining to Assessment Year 2019-20, wherein the \nassessee through his various grounds of appeal has effectively challenged the \ninvocation of provision of Section 69 r.w.s 115BBE of the Act in respect of amount \nof Rs. 25,02,000/- which was surrendered during the course of survey offered to \ntax under normal provisions in the return of income. \n2. \nBriefly the facts of the case are that the assessee is a medical practitioner \nand also engaged in the business of medical store under the name and style of \nM/s Gursharan Chemist, 39-43, Shopping Complex, Tripuri Patiala. A survey \noperation under section 133A was carried out at the business premises of the \nassessee on 23/04/2018 wherein the assessee surrendered a sum of Rs. \n25,02,000/- in respect of excess stock. Subsequently, the assessee filed his return \n\n2 \n \nof income on 24/10/2019 wherein the amount so surrendered during the course \nof survey was duly offered to tax under the normal provisions. Thereafter case of \nthe assessee was selected for compulsory scrutiny and notices under section \n143(2) and 142(1) were issued and thereafter, taking into consideration the \nresponse filed by the assessee to the specific show cause but not finding the \nsame acceptable, the AO invoked the provisions of Section 69 in respect of \nadditional income so surrendered by the assessee amounting to Rs. 25,02,000/-. \n3. \nBeing aggrieved, the assessee carried the matter in appeal before the Ld. \nCIT(A) and has sustained the said action on the part of the AO, against which \nthe assessee is in appeal before us. \n4. \nDuring the course of hearing, the Ld. AR submitted that the assessee is a \nmedical practitioner and also running a medical store from past many years \nand no other source of income has been identified during the course of survey \nand the only source of income is from the identified business of medical \npractitioner and medical store. \n4.1 \nIt was submitted that similar submissions were made before the lower \nauthorities and our reference was drawn to the reply to the show cause filed \nduring the course of assessment proceedings wherein the assessee has \nsubmitted that the excess stock found at the business premises of the assessee is \nnothing but only the result of suppression of profit from previous few years and \nstock is not separately identifiable but is part of the mixed lot of stock found at \nthe premises of the assessee which include declared stock as per books and \nalso the excess stock as computed by the survey team. It was accordingly \nsubmitted that since excess stock is a result of suppression of profit from business \nover the years and has not been kept identifiable separately but is the part of \noverall physical stock found, the investment in the excess stock has to be \n\n3 \n \ntreated as business income and the same has been rightly accepted by the \nsurvey team@30%. \n4.2 \nIt was further submitted that once a specific surrender was made by the \nassessee and which has been accepted by the survey team as business income \nand tax on the same has been realized, the Revenue cannot take different \nposition while framing the assessment by taxing the same under section 69 of \nthe Act. \n4.3 \nIt was further submitted that the stock brought by the assessee was of \nmedicines which is part of the regular business operations of the assessee and \nthe survey team has itself compared the physical stock as found during the \ncourse of survey with the stock as per books of account which duly justifies that \nthe Revenue itself accepts that the stock pertains to the regular business of the \nassessee and the same should be brought to tax under the head “business \nincome” and not by invoking the deeming provision under section 69 of the Act. \nFurther, in support reliance was placed on various Coordinate Benches \ndecisions. \n5. \nPer contra, the Ld. DR submitted that for the unaccounted stock found \nduring the survey operation, there can be no presumption to treat the value \nrepresenting such excess stock as application of business income in absence of \nany evidence of earning that income or details thereof which has been \ninvested in stock. It was submitted that the assessee has not been able to \nestablish necessary nexus between the excess stock and normal business \nincome. It was accordingly submitted that the action of the AO in applying the \ndeeming provisions r.w.s 115BBE of the Act cannot be disputed and accordingly \nthe Ld. CIT(A) has rightly affirmed the order of the AO in treating the surrender \non account of unaccounted stock found during the course of survey as \n\n4 \n \ndeemed income. It was accordingly submitted that the order so passed by the \nLd. CIT(A) be confirmed and the appeal so filed by the Assessee be dismissed. \n6. \nWe have heard the rival contentions and purused the material available \non record. We find that the matter is squarely covered by our decision in case of \nShri Parmod Singla, Prop. M/s Singla Wire & Allied Products Vs. ACIT (in ITA No. \n516/Chd/2022 dt. 24/07/2023) wherein we have discussed the matter in detail \nincluding the various authorities quoted at Bar. It would be relevant to refer to \nthe discussions and findings therein which are equally relevant in the instant \ncase and same read as under: \n“13. \nWe have heard the rival contentions and purused the \nmaterial available on record. The genesis of the present case lies in \nthe survey operations u/s 133A conducted at the business premises \nof the assessee on 8/07/2016 wherein the assessee surrendered a \nsum of Rs 84.80 lacs, thereafter the return of income filed by the \nassessee on 23/03/2018 was selected for compulsory manual \nscrutiny as per CBDT guidelines presumably to examine whether the \nassessee has honoured the surrender so made at the time of survey \nwhile filing his return of income, as also evident from the conduct \nof the assessment proceedings by the AO in terms of issuing the \nshow-cause and seeking comments of the assessee on the amount \nso surrendered during the course of survey and subsequent passing \nof the assessment order. As per the AO, the amount so surrendered \nby the assessee during the course of survey though has been \noffered in the return of income and thus, the assessee has \nhonoured the surrender of income so made but at the same time, \nthe income so offered in the return of income falls under the \ndeeming provisions of section 69 and 69A of the Act and thus, the \ntax liability thereon has to be determined in terms of section 115BBE \nof the Act. As per the ld AR, the assessee has honoured the \nsurrender so made at the time of survey not just in terms of the \nquantum of income so surrendered but also in terms of nature of \nincome so surrendered, and the rate of tax at which the surrender \nhas been made and surrender so made has been accepted by the \nsurvey team and thus, the deeming provisions of section 69 and 69A \nr/w section 115BBE are not attracted in the instant case. \n14. \nTo appreciate the aforesaid rival positions, we refer to the \nprovisions of section 69 and 69A of the Act. Section 69 provides \nthat where in the financial year immediately preceding the \nassessment year, the assessee has made investments which are not \nrecorded in the books of account, if any, maintained by him for any \nsource of income, and the assessee offers no explanation about the \nnature and source of the investments or the explanation offered by \n\n5 \n \nhim is not, in the opinion of the Assessing Officer, satisfactory, the \nvalue of the investments may be deemed to be the income of the \nassessee of such financial year. Section 69A provides that where in \nany financial year the assessee is found to be the owner of any \nmoney, bullion, jewellery or other valuable article and such money, \nbullion, jewellery or valuable article is not recorded in the books of \naccount, if any, maintained by him for any source of income, and \nthe assessee offers no explanation about the nature and source of \nacquisition of the money, bullion, jewellery or other valuable article, \nor the explanation offered by him is not, in the opinion of the \nAssessing Officer, satisfactory, the money and the value of the \nbullion, jewellery or other valuable article may be deemed to be the \nincome of the assessee for such financial year. \n15. \nIn the instant case, for the deeming provisions of section 69 to \nbe attracted, there has to be a finding that the assessee has made \ninvestments during the financial year in the stock and by way of \nadvances, such investments are not recorded in the books of \naccounts so maintained by the assessee, and the assessee offers no \nexplanation about the nature and source of the investments or the \nexplanation so offered is not found satisfactory in the opinion of the \nAO. Similarly, for the deeming provisions of section 69A to be \nattracted, there has to be a finding that the assessee was found to \nbe owner of cash so found at the time survey, such cash has not \nbeen recorded in the books of accounts so maintained by the \nassessee, and the assessee offers no explanation about the nature \nand source of the cash or the explanation so offered is not found \nsatisfactory in the opinion of the AO. \n16. Recently, in case of Surender Kumar & others (ITA No. \n398/Chd/2022), the Coordinate Chandigarh Benches has held that \nthere \nis \ndifference \nbetween \nthe \nundisclosed \nincome \nand \nunexplained income and the deeming provisions are attracted in \nrespect of undisclosed income however, the condition before \ninvoking the same is that the assessee has either failed to disclose \nthe nature and source of such income or the AO doesn’t get \nsatisfied with the explanation so offered by him and the relevant \nfindings read as under: \n“10. We have considered the rival contentions and have gone \nthrough the record. As per the provisions of Section 115BBE of the \nAct, the income tax on income referred to in Section 68 or Section \n69 or Section 69A or Section 69B or Section 69C or Section 69D are \nchargeable to tax at a higher rate. Now a perusal of the provisions \nof Section 68, 69, 69A, 69B, 69C and 69D would reveal that those \nprovisions \nare \nattracted \nin \nrespect \nof \nthe \ncredits, \ncash, \nexpenditure, investment etc. regarding which the assessee offers no \nexplanation about the nature and source thereof. It is to be \npointed out that the income is to be assessed u/s 68 wherein any \nsum is found credited in the books, of which the assessee offers no \nexplanation \nabout \nthe \n‘nature \nand \nsource \nthereof’ \nor \nthe \n\n6 \n \nexplanation offered by him is not found satisfactory by the AO. \nSection 69 is attracted to the unexplained investments of which the \nassessee offers no explanation about the ‘nature and source’ \nthereof or the explanation is not found satisfactory. Similarly, \nSection 69A is attracted in case of money, bullion, jewellery or \nother valuable articles, Section 69B refers to the investments, \nSection 69C refers to the expenditure and Section 69D refers to the \namount borrowed or repaid on hundi. The provisions of these \nSections are attracted and the income is assessed under these \nSections, if, the assessee fails to give the explanation about the \n‘nature and source’ of such undisclosed income. The ld. PCIT in our \nview, in this case has confused himself between the ‘undisclosed \nincome’ and the word ‘unexplained income’. As per provisions of \nSection 68 to 69D are attracted in respect of the undisclosed \nincome but the condition for assessing such income under the said \nprovisions is that the assessee has either failed to disclose the \nnature and source of such income or the AO does not get satisfied \nwith the explanation offered by him. \n15. The perusal of the above relevant part of the Audit Report \nproposal of the AO and Show Cause Notice issued by the ld. PCIT \nu/s 263 of the Act, would show that all the aforesaid authorities \nhave been swayed by the notion that the income surrendered by \nthe \nassessee \nwas \nundisclosed \nincome \nof \nthe \nassessee \nand \ntherefore, the same has to be assessed u/s 68 to 69D, as the case \nmay be, of the Income Tax Act and thereby would be charged to \nhigher rate of tax u/s 115BBE of the Act. However, as noted above, \nfor an income to be taxed u/s 68 to 69D, as the case may be, it \nshould not only be the undisclosed income but the essential \ncondition is that the assessee has failed to disclose the ‘nature and \nsource’ of such undisclosed income or that the explanation offered \nby the assessee is not found satisfactory by the AO. In the case in \nhand, as noted above, the AO duly made enquiries from the \nassessee as to the nature and the source of the aforesaid \nsurrendered income and has also show caused the assessee as to \nwhy the same should not be charged at a higher rate of tax as per \nprovisions of Section 115BBE of the Act. The ld. AO after considering \nthe submissions and explanations of the assessee accepted the \ncontention of the assessee that the surrendered income was out of \nthe business income of the assessee. The perusal of the impugned \norder of the ld. PCIT would show that the ld. PCIT has not pointed \nout as to why the explanation offered by the assessee to the AO \nwas not satisfactory and further what more enquiries are required \nto be conducted in this case, which the AO had failed to conduct. \nThe ld. PCIT has simply based his opinion and order on the Audit \nObjections/Report as pointed out even in the Audit Report that \nsince the same was undisclosed income of the assessee which was \nsurrendered by the assessee during the survey action and therefore, \nthe same was to be assessed under the provisions of Section 68 to \n69D of the Act. The above reasoning of the survey party is not in \naccordance with the relevant provisions of the Act. Therefore, we \n\n7 \n \ndo not find any justification on the part of the ld. PCIT in invoking \nthe Revisionary jurisdiction in this case.” \n17. \nTherefore, the foundational requirement before invoking the \ndeeming provisions is not that there were certain survey operations \nu/s 133A and some undisclosed income has been detected and \nsurrendered by the assessee and thus, the deeming provisions are \nautomatically attracted. Rather the foundational requirement is \nwhether the assessee has made the investment/has been found to \nbe owner of cash and the explanation offered by the assessee \nexplaining the nature and source of such undisclosed income and \nthe reasonability of the explanation so offered by the assessee \nkeeping into account the facts and circumstances of the relevant \ncase. In fact, if we look at the provisions of section 133A, clause (iii) \nof sub-section (3) provides that an income tax authority acting \nunder this section shall record the statement of any person which \nmay be useful for or relevant to any proceedings under this Act. \nTherefore, what explanation has been offered by the assessee as \npart of his statement recorded u/s 133A needs to be analysed and \nexamined before drawing any conclusions in this regard. \n18. \nIn the instant case, in the statement so recorded of the \nassessee during the course of survey, in Question No. 3 raised by \nthe survey team, the assessee was asked about the source of his \nincome and in response, the assessee submitted that he was sole \nProprietor of M/s Singla Wire and Allied Products, Patiala and \nexcept the said business, he has no other source of income. Further, \nhe stated that he was not partner/Director in any of the firm or \ncompany. In Question No. 4 raised by the survey team, he was \nasked to state the date of commencement of his concern and the \nnature of activity carried out alongwith details of manufactured \nproducts. In response, the assessee submitted that the concern \nstarted business in the year 2008 and it is involved in manufacturing \nof aluminum and copper wires and thereafter, he has given the \ndetails of manufacturing process. In Question No. 10, he was asked \nby the survey team that as per assessee’s books of account, there \nwas cash in hand of Rs. 66,400/- however on physical verification, \nRs. 10,46,000/- is found from your business premises thus there is \nexcess cash of Rs. 9,80,000/- and the assessee was asked to explain \nthe discrepancy. In response, the assessee submitted that at this \npoint in time, he was not in a position to explain the said \ndiscrepancy found in cash and offered the difference of Rs. \n9,80,000/- for taxation. In Question No. 11, the survey team noted \nthat one note pad (katcha) was found during the course of survey \nand advance to various persons to the tune of Rs. 55,00,000/- has \nbeen found noted therein and the assessee was asked to explain \nthe nature of these advances. In response, the assessee submitted \nthat these advances relates to his business activity, however he is \nnot in a position to explain the same at this moment of time and to \nbuy peace of mind, he offered this amount of Rs. 55,00,000/- for \ntaxation for the F.Y. 2016-17 pertaining to A.Y 2017-18. In Question \n\n8 \n \nNo. 12, the survey team stated that stock to the tune of Rs. \n17,38,400/- has been found as per the books of account maintained \nby the assessee, however on physical verification, stock to the tune \nof Rs. 37,38,210/- has been determined and the assessee was asked \nto explain the difference of excess stock valued at Rs. 20,00,000/-. \nIn response, the assessee submitted that at this moment of time, he \nis not in a position to explain the said difference of Rs. 20,00,000/- \nhowever to buy peace of mind, he offered this amount of Rs. \n20,00,000/- for taxation for the F.Y. 2016-17 pertaining to A.Y. 2017-\n18. Thereafter, in the statement so recorded, it is mentioned that \ntaxes on total additional income of Rs. 84,80,000/- so surrendered \nby the assessee were worked out and three post dated cheques \nwere given by the assessee to the survey team for securing the \npayment of due taxes amounting to Rs. 26,20,000/-. Thereafter, in \nterms of surrender letter dt. 08-09/07/2016 addressed to the \nAdditional CIT, Patiala Range, Patiala, the assessee has reiterated \nthe amount surrendered of Rs. 84,80,000/- which were offered as \nadditional income at the time of survey on account of certain \ndiscrepancies noticed in terms of advances to various persons \namounting to Rs. 55,00,000/-, cash in hand of Rs. 9,80,000/-, excess \nstock of Rs. 20,00,000/- and the tax liability of Rs. 26,20,000/- which \nhas been worked out at the time of survey and the details and \nparticulars of the cheque issued were mentioned. \n19. \nWe therefore find that through various questions raised during \nthe course of survey, the assessee has been asked about the nature \nand source of his income and various discrepancies so found during \nthe course of survey. In response, the assessee has stated that he is \nrunning a sole proprietorship business concern in name of M/s \nSingla \nwires \nand \nallied \nproducts \nsince \n2008 \nwherein \nhe \nmanufactures and sells aluminum and copper wires and all along, \nthe same is his only source of income and thereafter, he has been \nconfronted with discrepancies in terms of cash found excess as \ncompared to what has been recorded in the books of accounts, \ncertain advances relating to his business written in a rough diary \nand excess value of stock as compared to what has been recorded \nin the books of accounts. Therefore, we find that the assessee has \nbeen confronted with not just the discrepancy so found during the \ncourse of survey but the nature and source thereof during the \ncourse of survey proceedings and it is clearly emerging that the \nsource of such income is from his business operations. There is a \nclear statement of the assessee that the advances are related to \nhis business, however since the same have not been recorded in \nthe books of accounts, he has offered the same to taxation. \nSimilarly, the stock physically found has been valued and then, \ncompared with stock as recorded in the books of accounts, thus, \nthere is clear nexus of stock with the assessee’s business. The \nstatement of the assessee is available on record and related \ndocuments so found during the course of survey are stated to be in \npossession of the Revenue authorities. Apparently, the AO has \nfailed to take into consideration the statement of the assessee \n\n9 \n \nrecorded during the course of survey holistically, and other \ndocuments and findings of the survey team which are very much \npart of the records. Following the surrender so made during the \ncourse of survey, the assessee has honored the surrender so made \nand offered the additional income as business income in his return \nof income and paid due taxes thereon. \n20. \nIn our view, what is relevant before invoking the deeming \nprovisions is not just the factum of survey action but besides that, \nwhat is the explanation so offered by the assessee explaining the \nnature and source of income so found during the course of survey \nproceedings and which has not been recorded in the books of \naccounts and the same is the essence of the statutory provisions as \nduly recognized by the Courts and various Benches of the Tribunal \nand which has been reiterated from time to time. The statement of \nthe assessee has to be read as a whole and not in piecemeal \nespecially where the Revenue is relying on the same statement and \nin such circumstances, the defence available to the assessee in \nterms of part of the statement not been considered by the Revenue \ncannot be ignored. The mere fact that survey/search proceedings \nhave been initiated at the business premises of the assessee \ndoesn’t mandate the Assessing officer to automatically invoke the \ndeeming provisions and before invoking the deeming provisions, he \nhas to call for the explanation of the assessee and only where the \nexplanation so offered is not found satisfactory, he can proceed \nand invoke the deeming provisions. \n21. \nIn case of Gandhi Ram (ITA No. 121/CHD/2021 dated \n04/08/2022), speaking through one of us, it was held that it is like \nlaying a general rule which is beyond the mandate of law that \nwherever there is a survey and some income is detected or \nsurrendered by the assessee, the deeming provisions are attracted \nby default and by virtue of the same, provisions of section 115BBE \nare attracted and the relevant findings read as under: \n5. “Firstly, how the ld PCIT has arrived at a conclusive finding that the \ndiscrepancies found, confronted and accepted by the assessee during the \ncourse of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C \nis not apparent from the impugned order. Merely stating that excess cash is \nclearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction \nof Shed/Godown is covered u/s 69B or 69C and advances made to Sundry \nParties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not \nsupported by any specific finding that the matter shall fall under which of the \nspecific sections and how the conditions stated therein are satisfied before the \nsaid provisions are invoked. It is like laying a general rule, which to our mind is \nbeyond the mandate of law, that wherever there is a survey and some income is \ndetected or surrendered by the assessee, the deeming provisions are attracted \nby default and by virtue of the same, provisions of section 115BBE are attracted. \nThe ld PCIT has to record his specific findings as to the applicability of the relevant \nprovisions and how the explanation called for and offered by the assessee is not \nacceptable in the facts of the present case which is clearly absent in the instant \ncase. Therefore, where the ld PCIT himself is not clear about the applicability of \n\n10 \n \nrelevant provisions and in the same breath holding the Assessing officer to task by \nnot invoking the said provisions is clearly shooting in the dark which cannot be \nsustained in the eyes of law and the order so passed therefore cannot be held as \nerroneous in the eyes of law.” \n22. In case of Chokshi Hiralal Maganlal Vs. DCIT (Supra), briefly the \nfacts of the case were that during the course of survey under \nsection 133A which was carried out at the premises of the assessee, \nexcess stock of gold and silver ornaments were found and in the \nreturn of income subsequently filed by the assessee, he had \nincluded the value of excess stock as part of closing stock \ninventory. However the AO observed that the said disclosure was \nnot consistent with the provisions of Section 69B of the Act and \nsame was accordingly brought to tax under section 69B. The Ld. \nCIT(A) confirmed the order of the AO and thereafter on further \nappeal, the Coordinate Ahmedabad Bench held that the excess \nstock found during the survey is not separately and clearly \nidentifiable but is part of mix lot of stock found at the premises \nwhich included declared stock as per books and also the excess \nstock as computed by the Survey Officers and therefore the \nprovisions of Section 69B cannot be made applicable as primary \ncondition for invoking the said provision is that the asset should be \nseparately identifiable and it should have independent physical \nexistence of its own and since excess stock as a result of \nsuppression of profit from business over the years and has not kept \nidentifiable separately but as part of overall physical stock found, \nthe investment in the excess stock has to be treated as business \nincome and thereafter has referred to the decision of the Tribunal \nin case of Fashion Fashion World Vs. ACIT (IT Appeal No. 1634(Ahd.) \nof 2006, dt. 12/02/2010) wherein the Tribunal had observed as \nunder: \n“11. But this does not mean that loss computed under any of the \nfive heads mentioned in section 14 – (i) ‘salary’, (ii) ‘income from \nhouse property’, (iii) ‘profits and gains from business or profession’, \n(iv) ‘capital gains’ and (v) ‘income from other sources’ – cannot at \nall be adjusted against unexplained investment or expenditure. \nWhat is necessary as per Hon. Gujarat High Court is that source of \nacquisition of asset or expenditure should be clearly identifiable. In \nthe case before Hon. Gujarat High Court the source of gold \nconfiscated was not identifiable and hence adjustment was not \npermitted. \n12. Thus the important aspect that emerges from the entire \ndiscussion is that for invoking deeming provisions under sections 69, \n69A, 69B & 69C there should be clearly identifiable asset or \nexpenditure. In the present case we find that entire physical stock \nof Rs.25,14,306/- was part of the same business. Both kind of stock \ni.e. what is recorded in the books and what was found over and \nabove the stock recorded in the books, were held and dealt \nuniformly by the assessee. There was no physical distinction \nbetween the accounted stock or unaccounted stock. No such \n\n11 \n \nphysical distinction was found by the Revenue either. The assessee \nhas repeatedly claimed that unaccounted business income is \ninvested in stock and there is no amount separately taxable under \nsection 69. The department has ignored this claim of the assessee \nand sought to tax the difference between book-stock and physical-\nstock \nas \nunaccounted \ninvestment \nunder \nsection \n69 \nwithout \nconsidering the claim of the assessee that first the business receipt \nhas to be considered and then investment should be treated as \ncoming out of such unaccounted income. The difference in stock \nso worked out by the authorities below had no independent \nidentity of its own and it is part and parcel of entire lot of stock. \nThe difference between declared stock in the books and what is \nphysically found would only be a mathematical expression in terms \nof value and not a separate independent identifiable asset. \nTherefore, it cannot be said that there is an undisclosed asset \nexisted independently. Once this is so then what is not declared to \nthe department is receipt from business and not any investment as \nit cannot be co-related with any specific asset. \n13. Thus in a case where source of investment/expenditure is clearly \nidentifiable and alleged undisclosed asset has no independent \nexistence of its own or there is no separate physical identity of such \ninvestment/expenditure then first what is to be taxed is the \nundisclosed \nbusiness \nreceipt \ninvested \nin \nunidentifiable \nunaccounted asset and only on failure it should be considered to \nbe taxed under section 69 on the premises that such excess \ninvestment is not recorded in the books of account and its nature \nand source is not identifiable. Once such excess investment is \ntaxed as undeclared business receipt then taxing it further as \ndeemed income \nunder section \n69 \nwould \nnot be necessary. \nTherefore, the first attempt of the assessing authority should be to \nfind out link of undeclared investment/expenditure with the known \nhead, give opportunity to the assessee to establish nexus and if it is \nsatisfactorily established then first such investment should be \nconsidered as undeclared receipt under that particular head. It is \nonly where no nexus is established with any head then it should be \nconsidered as deemed income under section 69, 69A, 69B & 69C as \nthe case may be. It is because when assessee fails to explain \nsatisfactorily the source of such investment then it should be taxed \nunder section 69, 69A, 69B & 69C as the case may be. It should not \nbe done at the first instance without giving opportunity to the \nassessee to establish nexus. Therefore, there is no conflict with the \ndecision of Hon. Gujarat High Court in the case of Fakir Mohmed \nHaji Hasan (supra) where investment in an asset or expenditure is \nnot identifiable and no nexus was established then with any head \nof income and thus was not available for set off against any loss \nunder any other head. Therefore, we hold that where asset in which \nundeclared investment is sought to be taxed is not clearly \nidentifiable or does not have independent identity but is integral \nand inseparable (mixed) part of declared asset, falling under a \n\n12 \n \nparticular \nhead, \nthen \nthe \ndifference \nshould \nbe \ntreated \nas \nundeclared business income explaining the investment. \n14. To conclude sum of Rs.8,10,011/- being difference in stock is \nrepresented by undeclared business income. It does not have a \nseparate physical identity. It is to be only taxed under the head \n‘business’. Other assets have separate physical identity being \nfurniture and fixtures, air conditioners etc. They cannot have a \ndirect nexus with business and therefore investment therein has to \nbe considered under section 69 only.” \n15. In view of the above, AO is directed to consider the sum of \nRs.8,10,011/- as undisclosed business income assessable under the \nhead ‘business’ and other two sums under section 69. The business \nincome including application of section 40(b) has to be considered \naccordingly. For calculation of income in view of our above \nobservations, we restore the matter to the file of AO. \n23. \nIn the instant case as well, we find that the difference in \nstock so found out by the authorities has no independent identity \nand is part and parcel of entire stock, therefore, it cannot be said \nthat there is an undisclosed asset which existed independently and \nthus, what is not declared to the department is receipt from \nbusiness and not any investment as it cannot be co-related with \nany specific asset and the difference should thus be treated as \nundeclared business income. \n24. \nFollowing the said decision of the Coordinate Ahmedabad \nBench, the Jaipur Bench in case of DCIT Vs. Shri Ram Narayan Birla \n(Supra) has taken a similar view holding that the excess stock so \nfound during the course of survey was part of the stock and the \nRevenue has not pointed out the excess stock has any nexus with \nany other receipts other than the business being carried on by the \nassessee. The relevant findings are contained at para 4.3 which \nread as under: \n“4.3. We have heard rival contentions and perused the material \navailable on record. Undisputed facts emerged from the record \nthat at the time of survey excess stock was found. It is also not \ndisputed that the assessee is engaged in the business of jewellery. \nDuring the course of survey excess stock valuing Rs. 77,66,887/- was \nfound in respect of gold and silver jewellery. The Coordinate Bench \nin the case of Chokshi Hiralal Maganlal vs. DCIT, 131 TTJ (Ahd.) 1 \nhas held that in a cases where source of investment/expenditure is \nclearly \nidentifiable \nand \nalleged \nundisclosed \nasset \nhas \nno \nindependent existence of its own or there is no separate physical \nidentity of such investment/expenditure then first what is to be \ntaxed is the undisclosed business receipt invested in unidentifiable \nunaccounted asset and only on failure it should be considered to \nbe taxed under section 69 on the premises that such excess \ninvestment is not recorded in the books of account and its nature \nand source is not identifiable. Once such excess investment is \n\n13 \n \ntaxed as undeclared business receipt then taxing it further as \ndeemed income \nunder section \n69 \nwould \nnot be necessary. \nTherefore, the first attempt of the assessing authority should be to \nfind out link of undeclared investment/expenditure with the known \nhead, give opportunity to the assessee to establish nexus and if it is \nsatisfactorily established then first such investment should be \nconsidered as undeclared receipt under that particular head. It is \nobserved that there is no conflict with the decision of Hon’ble \nGujarat High Court in the case of Fakir Mohd. HajiHasan (supra) \nwhere investment in an asset or expenditure is not identifiable and \nno nexus was established then with any head of income and thus \nwas not available for set off against any loss under any other head. \nTherefore, the Hon’ble Coordinate Bench held that where asset in \nwhich \nundeclared \nindependent \nidentity \nbut \nis \nintegral \nand \ninseparable (mixed) part of declared asset, falling under \na \nparticular \nhead, \nthen \nthe \ndifference \nshould \nbe \ntreated \nas \nundeclared business income explaining the investment. In the \npresent case the excess stock was part of the stock. The revenue \nhas not pointed out that the excess stock has any nexus with any \nother receipts. Therefore, we do not find any fault with the decision \nof the ld. CIT (A) directing the AO to treat the surrendered amount \nas excess stock qua the excess stock found.” \n25. \nThereafter, \nthe \nCoordinate \nJaipur \nBenches \nin \ncase \nof \nBajargan Traders Vs. ACIT (Supra) has similarly held as under: \n“2.10. We have heard the rival contentions and perused the \nmaterial available on record. During the course of survey, the \nassessee has surrendered an amount of Rs. 70,04,814/- towards \ninvestment in stock of rice which had not been recorded in the \nbooks of accounts. Subsequently, in the books of accounts, the \nassessee \nhas \nincorporated \nthis \ntransaction \nby \ndebiting \nthe \npurchase account and crediting the income from undisclosed \nsources. In the annual accounts, the purchases of Rs. 70,04,814/-\nwere finally reflected as part of total purchases amounting to Rs. \n33,47,19,658/- in the profit and loss account and the same also \nfound included as part of the closing stock amount to Rs. \n1,94,42,569/-in the profit/loss account since the said stock of rice \nwas not sold out. In addition to the purchase and the closing stock, \nthe amount of RS. 70,04,814/- also found credited in the profit and \nloss account as income from undisclosed sources. The net effect of \nthis double entry accounting treatment is that firstly the unrecorded \nstock of rice has been brought on the books and now forms part of \nthe recorded stock which can be subsequently sold out and the \nprofit/loss therefrom would be subject to tax as any other normal \nbusiness transaction. Secondly, the unrecorded investment which \nhas gone in purchase of such unrecorded stock of rice has been \nrecorded in the books of accounts and offered to tax by crediting \nthe said amount in the profit and loss account. Had this investment \nbeen made out of known source, there was no necessity for \nassessee to credit the profit/loss account and offer the same to tax. \nAccordingly, we do not see any infirmity in assessee's bringing such \n\n14 \n \ntransaction in its books of accounts and the accounting treatment \nthereof so as to regularise its books of accounts. In fact, the same \nprovides a credible base for Revenue to bring to tax subsequent \nprofit/loss on sale of such stock of rice in future. \n2.11. Having said that, the next issue that arises for consideration is \nwhether the amount surrendered by way of investment in the \nunrecorded stock of rice has to be brought to tax under the head \n\"business income\" or \"income from other sources\". In the present \ncase, the assessee is dealing in sale of foodgrains, rice and oil \nseeds, and the excess stock which has been found during the \ncourse of survey is stock of rice. Therefore, the investment in \nprocurement of such stock of rice is clearly identifiable and related \nto the regular business stock of the assessee. The decision of the \nCo-ordinate Bench in case of Shri Ramnarayan Birla (supra) \nsupports the case of the assessee in this regard. Therefore, the \ninvestment in the excess stock has to be brought to tax under the \nhead \"business income\" and not under the head income from other \nsources\". In the result, ground No. 1 of the assessee is allowed.” \n26. \nThe said decision of Coordinate Jaipur Benches has since \nbeen confirmed by the Hon’ble Rajasthan High Court in case of \nPCIT vs Bajargan Traders (DB Appeal No. 258/2017 dt. 12/09/2017). \n27. \nSimilarly, the Coordinate Chandigarh Benches in case of M/s \nGaurish Steels Pvt. Ltd. Vs. ACIT (Supra) has held as under: \n“10. We have heard the rival contentions and perused the material \navailable on record. This is a fact on record that the assessee \nsurrendered an amount of Rs.70 lacs as additional income during \nthe course of survey conducted at its premises on account of \nfollowing heads: \n(i) \nDiscrepancy on account of cash \nfound \nRs. 9 lacs \n(ii) \nDiscrepancy \non \ncost \nof \nconstruction of building \nRs. 21 lacs \n(iii) \nDiscrepancy in stock \nRs. 10 lacs \n(iv) \nDiscrepancy \nin \nadvances \nand \nreceivable \nRs. 30 lacs \n \n11. These facts have not been disputed by any one at any stage. \nThe only issue to be considered by us is whether the income of Rs.70 \nlacs surrendered is to be taxable as business income or income \nfrom \nother \nsources \nor \nas \ndeemed \nincome \nunder sections \n69A, 69B and 69C of the Act as held by the Assessing Officer. A \nnumber of judicial pronouncements have been cited during the \ncourse of hearing, however, we have to bow down to the \n\n15 \n \nproposition laid down by the Jurisdictional Punjab & Haryana High \nCourt in the case of M/s Kim Pharma Pvt. Ltd.(supra) since this is the \nonly judgment of the Jurisdictional High Court which were brought \nto our notice. \n12. On perusal of the said judgment, we find ourselves in \nagreement with the submission of the learned counsel for the \nassessee, that the only issue in that case was the taxability of cash \nsurrendered during the course of survey, as the assessee had also \nsurrendered income of Rs.10 lacs in assessment year 2005-06 on \naccount of sundry credits, repairs to building and advances to \nstaff, which being relatable to business carried on by the assessee \nwas already included as income from business. \n13. In the present case, we see that the Assessing Officer has \nnowhere disputed the business losses incurred by the assessee. The \nbooks have not been rejected. It was stated at the Bar that even at \nthe time of survey, in the trading account prepared by the survey \nteam, there were losses incurred by the assessee. All these facts \nhave not been disputed by the Assessing Officer. Further, the \nsurrender made by the assessee was on account of cash found \nduring the course of survey, discrepancy in the cost of construction \nof building, discrepancy in stock and discrepancy in advances and \nreceivables. By no stretch of imagination, any of these incomes \napart from cash can be considered as income under any head \nother that the 'business income'. \n14. Nowhere in his order the Assessing Officer has been able to \nbring on record the fact that the income surrendered during the \ncourse of survey was not out of the business of the assessee. Also \nnowhere he has objected to the heads under which the assessee \nhad surrendered these amounts, i.e. cash, construction of building, \ndiscrepancy in stock and discrepancy in advances and receivable. \nFurther, even the survey team has not found any source of income \nexcept the business income. Now, following the judgment of \nJurisdictional High Court, in the background of the facts of the \npresent case, we can safely infer that apart from cash all other \nincome surrendered may be brought to tax under the head \n'business income' while the cash has to be taxed under the head \ndeemed income under section 69A of the Act.” \n28. \nSimilarly, the Coordinate Chandigarh Bench in case of \nFamina Knit Fabs Vs. ACIT (Supra) has held as under: \n“19. In the facts of the case in ITA No.408/Chd/2018, the income \nsurrendered was on account of unaccounted receivables of the \nbusiness of the assessee amounting to Rs.1.25 crores. The Ld.CIT(A) \nin para 9 of the order has outlined the facts relating to the \nsurrender made by the assessee stating that during survey a pocket \ndiary was found from the account section of the assessee company \nwhich contained entry of receivables amounting to Rs.1.25 crores \non pages 27, 28, 31 and 33, which were not recorded in the regular \n\n16 \n \nbooks of the assessee and were subsequently surrendered stating \nthat these entries were unaccounted sundry receivables being \nsurrendered as income under the head business, to buy piece of \nmind and subjected to no penalty and further that the losses \nincurred by the assessee in the impugned year will be adjusted \nagainst this surrendered income. The relevant facts as stated by the \nCIT(A) in para 9 of his order and which are not disputed, are \nreproduced hereunder: \n“9. Adverting now to the facts of the instant case, it is seen that \nwhen survey proceedings were conducted at the business premises \nof the appellant company, a pocket diary was found from the \naccounts section which contained entries of receivables amounting \nto Rs.1.25 crores on page nos. 27, 28, 31 and 33, which were not \nrecorded in the regular books of accounts. When these entries were \nconfronted \nto \nthe \nappellant \ncompany \nwhile \nrecording \nthe \nstatement on 15/09/2012, it was stated: \"that these entries are \nsundry receivables which has not been accounted for in the books \nof accounts and in order to buy peace of mind, the same is \nsurrendered as income under the head business for F.Y.2012-13 \nrelevant \nto \nasstt. \nYear \n2013-14 \nsubject \nto \nno \npenalty \nand \nprosecution under the I.T. Act, 1961. Since the company is incurring \nlosses in current F.Y.2012-13, the surrendered income will be \nadjusted against these losses.\" [Extracted from the impugned \nassessment order; pages 5 &6].” \n20. Clearly, it is evident from the above that the surrender was on \naccount of debtors/receivables relating to the business of the \nassessee only. The Revenue has accepted the surrender as such, as \nbeing on account of receivables. It follows that the debtors were \ngenerated from the sales made by the assessee during the course \nof carrying on the business of the assessee, which was not recorded \nin the books of the assessee. Though the said income was not \nrecorded in the books of the assessee but the source of the same \nstood duly explained by the assessee as being from the business of \nthe assessee. Even otherwise no other source of income of the \nassessee is there on record either disclosed by the assessee or \nunearthed by the Revenue. The preponderance of probability \ntherefore is that the debtors were sourced from the business of the \nassessee. Therefore, there is no question of treating it as deemed \nincome from undisclosed sources u/s 69, 69A, 69B and 69C of the \nAct and the same is held to be in the nature of Business Income of \nthe assessee. Having held so, the same was assessable under the \nhead ‘business and profession’ and as stated above, the benefit of \nset off of losses both current and brought forward was allowable to \nthe assessee in accordance with law. \n21. The contention of the Revenue therefore that the income be \ntreated as deemed income u/s 69,69A/B/C of the Act is accordingly \nrejected and as a consequence thereto the plea that no set off of \nlosses be allowed against the same u/s 115BBE of the Act also is \nrejected. \n\n17 \n \n22. Therefore, as per the facts of the case in ITA No.408/Chd/2018 \nand as per the provisions of law relating to the issue, the \nsurrendered income, we hold, was assessable as business income of \nthe assessee and set off of losses was to be allowed against the \nsame as rightly claimed by the assessee. \nThe appeal of the Revenue, therefore, in ITA No.408/Chd/2018 is \ndismissed. \n23. Now coming to the facts of the case in ITA No/1494/Chd/2017, \nthe income surrendered was on account of the following as \nnarrated above in earlier part of our order: \n(i) investment of Rs. 60 lacs in Kothi at Sukhmani Enclave in the \nname of Smt. Rekha Miglani; \n(ii) \nSundry \ncreditors \nand \nadvances \nreceived \nfrom \ncustomers \namounting to Rs. 132 lacs; \n(iii) Gross profit on sale out of books amounting to Rs. 198 lacs and; \n(iv) surrender to cover miscellaneous discrepancies in loose papers \netc. amounting to Rs. 10 lacs. \n24. As far as the surrender made on account of investment in Kothi \nof Rs.60 lacs, neither is the same disclosed in the books of the \nassessee nor source of the same disclosed. Therefore, the same is to \nbe assessed as deemed income u/s 69 of the Act. The same applies \nto the surrender of Rs.10 lacs made to cover the miscellaneous \ndiscrepancies in loose paper of Rs.10 lacs. Neither the nature of the \ndiscrepancies, nor any source relating to the same has been \ndisclosed and, therefore, the same is also to be assessed as \ndeemed income u/ss 69, 69A, 69B and 69C of the Act. \n25. As far as the surrender of Rs.132 lacs made on account of \nsundry creditors and advances received from customers and Rs.198 \nlacs on account of gross profit on sale out of the books, both of \nthem clearly are in relation to the business carried on by the \nassessee and are thus in the nature of business income. Therefore, \nthe set off of business losses, both current and brought forward are \nto be allowed as per the provisions of law. As far as the income \nsurrendered and to be assessed u/s 69, 69A, 69B and 69C of the \nAct, as held above before us, the same is to be subjected to tax as \nper the provisions of section 115BBE of the Act.” \n29. \nIn the instant case as well, the surrender on account of \nadvances were relating to the business being carried on by the \nassessee. The ld CIT(A) has also returned a finding that the \nadvances were admitted as being related to business activity of \nthe assessee. Where the same has been found unrecorded in the \nbooks of accounts, the same has to be brought to tax under the \nhead “business income”. \n\n18 \n \n30. \nSimilarly, the Coordinate Chandigarh Bench in case of M/s \nSham Jewellers Vs. The DCIT (Supra) has held as under: \n“10.17 Ground Nos. 8 & 9 challenge the action of the lower \nauthorities in applying the provisions of section 115BBE and thereby \ncharging tax at the rate of 60%. The main thrust of the arguments of \nthe Ld. AR has been that all the additions made or sustained relate \nonly to the business income of the assessee and that nowhere in \nthe assessment order has it been alleged that some other source of \nincome had been detected which gave rise to additional income. \nIt is seen that during the course of assessment proceedings, the \nvarious \nexplanations \nsubmitted \nby \nthe \nassessee \nhave \nduly \nmentioned that the surrendered income was derived from the \nbusiness. A perusal of the assessment order would also show that \nnowhere in the body of the assessment order, the AO has even \ncontradicted this explanation of the assessee. The AO has not \nbrought on record any iota of evidence to demonstrate that the \nassessee had any other source of income except income from \nbusiness and, therefore, it is our considered view that deeming such \nincome under the provisions of sections 68 or 69 would not hold \ngood. In our view, in such a situation, the AO could not have \nlegally and validly resorted to taxing the income of the assessee at \nthe rate of 60% in terms of provisions of section 115BBE of the Act. \n10.18 The Hon'ble Andhra Pradesh High Court in the case of \nPrincipal Commissioner of Income Tax Vs. Deccan Jewellers Ltd. \nreported in (2021) 438 ITR 131 (AP) held that where the assessee \nwas engaged in the business of Gold and Diamond jewellery and \nSilver articles and during the search and seizure operation u/s 132, \nexcess stock was found to be declared and the assessee had \nsubmitted that excess stock was result of suppression of profit from \nbusiness over the years and the same had not been kept identified \nseparately and the AO had duly considered and accepted the \nassessee’s explanation that investment in excess stock was to be \ntreated as business income, the revisional powers invoked by the \nPrincipal Commissioner u/s 263 of the Act were not correct in the \neyes of law. \n10.19 The ITAT Chandigarh Bench in the case of Famina Knit Fabs \nVs. ACIT reported in (2019) 176 ITD 246 (Chd-Trib) has held that, \nwherein during the course of survey, a surrender was made by the \nassessee on account of debtors / receivables which was based on \na diary found during the course of survey and the Revenue had \naccepted that the surrender was on account of receivables, it \nfollowed that the debtors were generated from the sales made by \nthe assessee during the course of carrying on the business of the \nassessee which was not recorded in the books of the assessee. The \nCoordinate Bench of the ITAT went on to further hold that though \nthe said income was not recorded in the books of the assessee but \nthe source of the same stood duly explained by the assessee as \nbeing from the business of the assessee and even otherwise no \nother source of income of the assessee was on record either \n\n19 \n \ndisclosed by the assessee or unearthed by the Revenue. The Bench \nfurther held that the preponderance of probability, therefore, is \nthat the debtors were sourced from the business of the assessee. \nTherefore, there was no question of treating it as deemed income \nfrom undisclosed sources u/s 69, 69A, 69B, or 69C of the Act and \nthe same was held to be in the nature of business income of the \nassessee. \n10.20 Thus, as in the present case, where the source of investment \nor expenditure is clearly identifiable and the alleged undisclosed \nasset has no independent existence of its own or there is no \nseparate physical identity of such investment or expenditure, then, \nfirst, what is to be taxed is the undisclosed business receipt invested \nin unidentifiable unaccounted asset and only on failure can it be \nconsidered to be taxed u/s 69 of the Act and further where once \nsuch investment or expenditure is brought within the purview of tax \nas undeclared business receipt, then taxing it further as deemed \nincome u/s 69 would be completely out of place. \n10.21 Similar view was taken by the Coordinate Bench of ITAT \nAhmedabad in the case of Chokshi Hiralal Maganlal Vs. DCIT \nreported in 131 TTJ 1 (Ahd.) \n10.22 It is also seen that the Ld. CIT(A) has relied on the judgement \nof the Hon'ble Punjab & Haryana High Court in the case of Kim \nPharma Ltd. Vs. CIT in ITA No. 106 of 2011 (O&M) and the Ld. CIT DR \nhas also quoted the same in his arguments before us. However, \nafter going through the aforesaid judgement of the Hon'ble Punjab \n& Haryana High Court, it is seen that in that particular case, the \nonly issue was with regard to the cash surrendered at the time of \nsurvey and no other income. The cash found could not be related \nto the already disclosed and accepted source of income of the \nassessee and, therefore, the Hon'ble Punjab & Haryana High Court \nheld that such surrendered cash was to be treated as deemed \nincome u/s 69 of the Act. However, in the present case before us, \nthe assessee has only one source of income i.e. business income \nand nowhere has it been brought on record that the assessee had \nany other source of income except business income and, therefore, \nwe respectfully state that judgement of the Hon’ble Punjab and \nHaryana High Court in the case of Kim Pharma Pvt. Ltd (supra) \nwould not apply on the facts of the present case. \n10.23 Accordingly, keeping in view the various judicial precedents \nas cited above and respectfully following the same, we hold that \nthe AO could not have legally invoked the provisions of section \n115BBE of the Act in the present case and further the Ld. CIT(A) was \nalso not legally correct in upholding of the application of provisions \nof section 115BBE of the Act. Accordingly, ground Nos. 8 and 9 are \nalso allowed.” \n31. \nNow, coming to the decision of Kim Pharma (P) Ltd. Vs. CIT \n[2013] 35 taxmann.com 456 (P&H). Briefly the facts of the case \n\n20 \n \nwere that the survey under section 133A was conducted at the \nbusiness premises of the assessee and during the course of survey, \ncash amounting to Rs. 5,00,000/- was found which was surrendered \nby the assessee for A.Y 2006-07 and another amount of Rs. \n10,00,000/- was surrendered for A.Y. 2005-06 on account of sundry \ncredits, repair to building and advances to staff. The matter \npertaining to A.Y 2006-07 came up for consideration before the \nCoordinate Chandigarh Benches and taking note of the statement \nof the General Manager of the assessee company recorded during \nthe course of survey wherein he had admitted the said cash has \nbeen generated out of income from other sources and in the \nabsence of nature of source of cash being proved, it uphold the \norder of the CIT(A) in including the additional income as deemed \nincome u/s 69A of the Act and relevant findings read as under: \n“9. In the facts of the present case before us, we find that \nunaccounted cash was found during the course of survey operation \nin the possession of the assessee company and the same was \nsurrendered as additional income for the year under appeal. The \nassessee has failed to explain the nature and source of the said \ncash found which was not recorded in the books of account, \nthough while surrendering the additional income it was admitted by \nthe Manager of the assessee company, in the statement recorded \nduring the course of survey that the said additional income is its \nincome from other sources. The Hon'ble Gujrat High Court in Fakir \nMohmed Haj Hussain Vs C IT had held as under : \n\"The scheme of sections 69, 69A, 69B, and 69C of the Income-tax \nAct, 1961, would show that in cases where the nature and source of \nacquisition of Money, bullion, etc., owned by the assessee or the \nsource of expenditure incurred by the assessee are not explained \nat all, or not satisfactorily explained, then the value of such \ninvestments and money or the value of articles not recorded in the \nbooks of account or the unexplained expenditure may be deemed \nto be the income of such assessee.\" \nIn the absence of the explanation / evidence regarding the sources \nof the additional income being satisfactorily explained by the \nassessee and applying the ratio of the Hon'ble Gujrat High Court in \nFakir Mohmed Haji Hasan Vs. C IT (supra), we hold that the \nadditional income offered is deemed income assessable u/s 69A of \nthe Act and no deduction is allowable against such deemed \nincome assessed u/s 69A of the Act in the hands of the assessee. \nFollowing the ratio laid down by the Gujrat High Court in Fakir \nMohmed Haji Hasan Vs. CIT (supra), once the assessee has failed to \nexplain the nature and source of cash found available with it and \nthe same is assessed as deemed income u/s 69A of the Act, \ntherefore, the corresponding deductions under the head Profits and \ngains \nare \nnot \navailable \nto \nthe \nassessee. \nThe \nbusiness \nloss \ndetermined for the year is not allowed to be setoff against such \ndeemed income included in the books of account. The alternative \nplea of the assessee of assessing the income under the head \n\n21 \n \nincome from other sources and allowing set off of losses u/s 71 of \nthe Act also fail in view of the above. \n9. The learned AR for the assessee had placed reliance in CIT & \nAnother Vs. S.K.Srigiri & Bros. (supra) for the proposition that even in \ncases of survey, the additional income surrendered is includible as \nincome from business. In the facts of that case, we find that the \nTribunal after considering the records and statement given by the \npartners of the assessee firm, on facts, came to the conclusion that \nassessee had received additional income from business onl y and \nnot from other sources. The said conclusion of the Tribunal was \nupheld by the Hon'ble Karnataka High Court in CIT & another vs. \nS.K.Srigiri & Bros. (supra) and the remuneration paid to the partners \nwas held allowable against the additional income form business. \nThe said precedent has been taken note of by the Hon'ble Gujrat \nHigh Court. \n10. In the facts of the present case, we find that assessee during \nthe course of survey had surrendered the income as income from \nother sources though a plea has been raised by the assessee that \nthe income was surrendered as income from job work but no \nevidence to prove the stand of the assessee has been brought on \nrecord. The assessee had also surrendered additional income of Rs. \n10 lacs in Assessment Year 2005-06 on account of sundry credits, \nrepairs to building and advances to staff, which being relatable to \nbusiness carried on by assessee was included as income from \nbusiness. However, in respect of cash found during survey, which \nwas not reflected in the books of account, no source was declared \nby the assessee and in the absence of nature of source of cash \nbeing proved, the same is not assessable as income from business. \nIn the circumstances, we uphold the order of the CIT(A) in including \nthe additional income as deemed income u/s 69A of the Act and \nnot allowing the benefit of the business losses determined against \nthe said deemed income. The grounds of appeal raised by the \nassessee are dismissed.” \n32. \nThereafter, the matter came up for consideration before the \nHon’ble Punjab & Haryana High Court and the Hon’ble High Court \nhas stated that the AO, the Ld. CIT(A) and the Tribunal after \nconsidering \nthe \nfactual \naspect \nnoticed \nthat \nthe \namount \nsurrendered during the survey was not reflected in the books of \naccounts and no source from where it was derived was declared by \nthe assessee and therefore it was deemed income of the assessee \nunder section 69A of the Act and accordingly the findings of the \nTribunal were affirmed and it was held that no substantial question \nof law arises and the appeal of the assessee was dismissed. We \ntherefore find that the statement of the General Manager as \nrecorded during the course of survey played a decisive role and \nwas taken into consideration by the Tribunal wherein he had \nadmitted that cash has been generated out of income from other \nsources and in the absence of nature of source of cash being \nproved, it uphold the order of the CIT(A) and thereafter, on further \n\n22 \n \nappeal, the order of the Tribunal was upheld by the Hon’ble High \nCourt. Unlike the said case, in the instant case, as we have noted \nabove, the assessee in his statement recorded during the course of \nsurvey has clearly stated that he is running a sole proprietorship \nbusiness concern in name of M/s Singla Wires and Allied products \nsince 2008 wherein he manufactures and sells aluminum and \ncopper wires and all along, the same is his only source of income \nand thereafter, he has been confronted with discrepancies in terms \nof cash found excess as compared to what has been recorded in \nthe books of accounts, certain advances relating to his business \nwritten in a rough diary and excess value of stock as compared to \nwhat has been recorded in the books of accounts. Therefore, we \nfind that the assessee has been confronted with not just the \ndiscrepancy so found during the course of survey but the nature \nand source thereof during the course of survey proceedings and it \nis clearly emerging that the source of such income is from his \nbusiness operations. Thus, the decision of the Hon’ble High Court, \nbeing rendered in the specific facts and circumstances of the said \ncase, doesn’t support the case of the Revenue in the instant case. \n \n33. \nIn light of aforesaid discussion and in the entirety of facts \nand circumstances of the case and following the decisions supra, \nthe income of Rs 84,80,000/- surrendered during the course of \nsurvey cannot be brought to tax under the deeming provisions of \nsection 69 and 69A of the Act and the same has been rightly \noffered to tax under the head “business income”. In absence of \ndeeming provisions, the question of application of section 115BBE \ndoesn’t arise for consideration.” \n7. \nIn the instant case as well, it is an admitted fact that the surrender on \naccount of excess stock is of regular stock in which the assessee deals in and \nthus related to the business being carried on by the assessee. Further the stock \nso found is not physically distinguishable and there is as such no physical \ndistinction between accounted stock and unaccounted stock and no such \nphysical distinction was found by the Revenue either. We therefore find that the \ndifference in stock so found out by the authority has no independent identity \nand is in terms of value terms only and thus part and parcel of entire sock \ntherefore it cannot be said that assessee has a undisclosed asset which existed \nindependently and thus what is not declared to the Department is receipt from \nthe business operation and not any investment as it cannot be correlated with \nany specific asset and difference thus be treated as business income. In light of \n\n23 \n \naforesaid discussion and in the entirety of facts and circumstances of the case \nthe amount representing the excess stock found during the course of survey \ncannot be brought to tax under the deeming provisions of Section 69 of the Act \nand the same has to be assessed to tax under the head business income and in \nabsence of any deeming provision the question of application of Section 115BBE \ndoes not arise and normal tax rate shall apply which has been applied by the \nassessee while filing the return of income. The order of the ld CIT(A) is \naccordingly set -aside and the AO is directed accordingly. \n \n8. \nIn the result, appeal of the assessee is allowed. \n \nOrder pronounced in the open Court on 30/10/2024. \n Sd/- \n \n \n \n \n \n \n Sd/- \n आकाश दीप जैन \n \n \n \n िवᮓम ᳲसह यादव \n (AAKASH DEEP JAIN) \n \n \n \n ( VIKRAM SINGH YADAV) \n उपा᭟यᭃ / VICE PRESIDENT \n \n \n लेखा सद᭭य/ ACCOUNTANT MEMBER \n \n \n \n \nAG \n \n \nआदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : \n \n1. \nअपीलाथᱮ/ The Appellant \n2. \nᮧ᭜यथᱮ/ The Respondent \n3. \nआयकर आयुᲦ/ CIT \n4. \nआयकर आयुᲦ (अपील)/ The CIT(A) \n5. \nिवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH \n6. \nगाडᭅ फाईल/ Guard File \n \nआदेशानुसार/ By order, \nसहायक पंजीकार/ Assistant Registrar \n \n \n"
Mehul