VIR KANTA JAIN WIFE OF SH. MOHINDER KUMAR JAIN W-9291, MODEL TOWN, BANGA (RURAL) THANIAN NAWANSHAHR,PUNJAB V. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JALANDHAR , PUNJAB

ITA 44/ASR/2024

AI Insights

The case involves Smt. Vir Kanta Jain, the proprietress of a Kirana goods trading business, who appealed against the order of the CIT(A) confirming the AO's decision to treat certain disclosed incomes during a survey as unexplained money and taxing them under section 115BBE. The survey conducted under section 133A revealed discrepancies in cash and stock, leading to a disclosure of additional income by the assessee. The primary legal contention was whether this income should be treated as business income and taxed at normal rates or as deemed income attracting higher tax rates under section 115BBE. The Tribunal examined the nature of the disclosed incomes and the applicable legal provisions, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 474751 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-09-2024
• Assessment Year: 2019-2020
• Appeal Filed On: 05-02-2024
• Other Referred Cases: Visvakarma Agro Industries vs ACIT, Jasjot Singh Garcha vs. PCIT, Durga Dass Surender Kumar and others, Khurana Rolling Mills, Famina Knit Fab, Marshal Machines, Sardar Finance Co., Rajesh Mahajan, Khushi Ram & Sons
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA VIJAY MOHITE
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Business income; Valuation report; Deemed to accrue or arise in india; Value adopted by valuation officer
• Section: 143(3); 142(1); 250; 139(1); 22; 69; 69A; 133A; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. UDAYAN DAS GUPTA, JUDICIAL MEMBER I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 Smt. Vir Kanta Jain Wife of Sh. Mohinder Kumar Jain, W-9291, Model Town, Banga (Rural) Thanian Nawanshahr, Punjab. [PAN:AFJPJ8653C] (Appellant) Vs. DCIT, Circle-1, Jalandhar. (Respondent) Appellant by Sh. Sudhir Sehgal, Adv. Respondent by Smt. Vandana Vijay Mohite, CIT. DR Date of Hearing 09.09.2024 Date of Pronouncement 18.10.2024 ORDER Per: Udayan Das Gupta, JM This appeal is preferred by the assessee against the order of the Ld. CIT (A)- 5, Ludhiana passed u/s 250 (6) dated 04/01/2024, which has emanated from the order of the DCIT, C.C. -1, Jalandhar passed u/s 143(3) dated 08/02/2022. 2. The grounds of appeal preferred by the assessee in Form No. 36 are as follows: I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 2 “1. That the Ld. CIT(A)-5, Ludhiana has erred in confirming the treatment of the additional income as offered during survey on account of Rs.8 lacs in the shape of cash as unexplained money u/s 69A and taxing the same u/s 115BBE. 2. That the Ld. CIT(A) has also erred in confirming the treatment of additional income of Rs.50 lacs as offered on construction of building during survey and further confirming the addition to the tune of Rs. 11,97,043/- based on the valuation report, of the departmental valuer u/s 69 and taxing the same u/s 115BBE. 3. That the Ld. CIT(A) has failed to appreciate the fact that during the course of survey, no other source of income was identified by the department and also the’ Ld. CIT(A) was not justified in ignoring the breach of understanding between the survey team and the assessee to treat the said income as ‘business Income’ as offered during survey and not taxing the same at the normal rate of taxes. 4. That the Ld. CIT(A) has failed to appreciate the fact the decisions of Jurisdictional Bench of the STAT, Chandigarh Bench, Chandigarh in large number of cases on identical facts as per written submissions submitted before the Worthy CIT (A). 5. That the finding of the Ld. CIT(A) ignoring the1 decided case laws by the Jurisdictional Chandigarh Bench of the ITAT is against the ‘facts and circumstances of the case.” 3. The brief facts of the case are that the assessee is engaged in the trading of Kirana goods (Grocery) under the name and style of M/s Ram Nath & Sons. The I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 3 assessee is a lady and a senior citizen and the business of the assessee is managed by the sons of the assessee Sh. Anil Jain and Sh. Umesh Jain. Regular return has been filed u/s 139(1) of the Act declaring a total income of Rs.10,41,0712/-, alongwith copy of tax audit report and audited financial statements. During the financial year 2018-19, a survey was conducted at the business premises of the assessee u/s 133A of the Act on 06.09.2018 and during the course of survey, discrepancy were found with respect to cash found at the premises and there were discrepancies in respect of physical stock of goods also. 3.1 Apart from above, there were evidences relating to investment in shop premises cum store building of the assessee. In order to cover up such discrepancy, the assessee made the following disclosure before the survey team. Sr. No. Particulars Amount in Rs. 1. Excess Cash Found 8,00,000/- 2. Excess Stock 17,00,000/- 3. Investment in Building 50,00,000/- Total 75,00,000/- 3.2 This surrender was made as additional income over and above the normal business income of the assessee and the said amount was duly capitalized in the assessee’s books of account and taxes has also been paid on this additional income disclosed at normal rates. The copy of the surrender letter and the copies of the I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 4 statements recorded in course of survey, of the son of the assessee, has been placed by the ld. AR in the paper book page 20 to 21 and page no. 134 to 152. 3.3 During the course of scrutiny proceedings detailed questions were raised by the AO and the assessee complied fully and has filed detail reply in response to such notices issued and the copies of such replies and notices are also placed in the paper book. The main allegation of the AO was that as to why the provisions of section 68/69 r.w.s. 115BBE of the Act should not be applied in the case of assessee. The explanation of the assessee was that the source of income surrendered stands explained and accepted by the department at the time of survey where by the assessee has categorically stated that the amount of Rs.75 lac which being surrendered as additional income over and above the normal business income has arisen out of the business of the assessee from trading of ‘Kirana goods’ which is the normal business activity claimed by the assessee. Subsequently, the residential building was valued by the DVO and the total value of the building was assessed at Rs.3,50,40,900/- (three crore fifty lakh forty thousand nine hundred ). There was specific allegation of an amount of Rs.67,76,301/- (sixty seven lakh seventy six thousand three hundred one) being incurred by the assessee in construction of house property during the year under appeal. Consequently, the assessment was finalized by the AO by accepting the disclosure on account of stock amounting to Rs.17 lakh accepted to have arisen out I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 5 of normal business activity but the AO treated the cash surrendered in course of survey amounting to Rs.8 lakh and the difference of Rs.11,97,043/-, (being the difference in valuation of immovable property as per the report of the DVO and the amount surrendered by the assessee during the course of survey on account of investment of building) as deemed income u/s 69/69A of the Act 61 and applied the provision of section 115BBE of the Act 61. 4. The matter was carried in appeal before the first appellate authority and the first appellate authority sustained the addition of Rs.11,97,043/-, being the addition on account of difference of investment in construction of shop room and has also upheld the rate of tax as per provision of section 115BBE in respect of the cash disclosure of Rs.8 lakh and the disclosure of Rs.50 lakh on account of investment in shop room. 5. Now, the assessee is in appeal before the Tribunal on the ground contained in the memorandum of appeal. 6. Arguments of the Ld. AR: The Ld. AR in course of hearing before us has submitted a paper book containing 152 pages , consisting of audited accounts, TAR, surrender letter of the assessee in course of survey, questions raised by the AO u/s 142(1) and reply of the assessee filed explaining the case, copy of DVO report in respect of valuation of the investment made for construction of business premises, copies of objections made I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 6 by the assessee to DVO report, copy of title deeds of property, copies of invoices of construction materials purchased in course of construction of building by the assessee, copies of challans containing sales of Kirana goods , recorded statement of assessee’s son Mr Anil Kumar Jain , amongst other papers. 6.1 The Ld AR submitted , that the assessee is an old lady and though she is the proprietress of the business of trading in Kirana and general Goods , located in a remote area of Banga , Punjab, the business is in effect, managed and carried out by her two sons Mr. Anil Kumar Jain and Mr Umesh Jain , under the trade name of “ Ramnath and Sons ” , and regular returns are filed by the assessee since past so many years and the lady is regularly assessed to tax. 6.2 In course of survey u/s 133A of the Act 61, on 6th September, 2018, the excess cash found at the business premises, amounting to Rs. 8,00,000/- , and the excess stock valued at Rs.17,00,000/- has been surrendered by the assessee as additional income , before the survey team. Apart from above , the assessee was in the process of construction of the business premises , against which the assessee has surrendered a further amount of Rs. 50 Lakhs as investment in building. The total surrender as per the surrender letter dated 07/09/2018 ( placed at page 21 of paper book ) , was Rs. 75,00,000/- ( Rs. Seventy five lakhs only ) , the bifurcation of which are as follows : Excess Cash found : Rs. 8,00,000/- I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 7 Excess Stock of Kirana goods : Rs. 17,00,000/- Investment in building ( Shop room) : Rs. 50,00,000/- Total surrender made by the assessee Rs. 75,00,000/- 6.3 He further submitted that the entire amount has been offered as additional income from KIRANA business , which has been offered for taxation , over and above the normal business income , and accordingly the said amount has been accounted for in books of accounts and audited balance sheet and the amount of Rs.75 lakhs has been capitalized in the proprietors capital account ( page – 19 of paper book ) and similar treatment has been accorded in the balance sheet in respect of the stock and investment in shop room premises. The entire amount of Rs 75 lakhs has been disclosed in the return as additional income and taxes on the said amount has been paid at normal rates. 6.4 He further stated that the AO has accepted the contention of the assessee as far as the additional disclosure of excess stock of Rs.17,00,000/- is concerned and has accepted the normal tax rates in respect of the same, but in respect of the disclosure on account of excess cash Rs.8 lakhs and building investment of Rs.50 lakhs, the tax rates as prescribed u/s 115BBE of the Act 61 has been applied, by considering the above two surrender as deemed income u/s 69 of the Act 61. I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 8 6.5 He further argued referring to the audited trading and profit loss account and the computation of income for the year under appeal, that the net profit from business was Rs.29,40,640/- and after considering the additional income of Rs. 75,00,000/- the returned income as per ITR - 3, was Rs.1,02,33,020/- ( after considering deductions under Chapter VIA), and submitted that as per the surrender letter the income has generated from normal business activity of trading of Kirana goods only, and there are no other business activity of the assessee and there other no other source of income from which this additional income could have been generated , and nothing has been unearthed by the survey team in course of survey to bring on record any other different types of activity , other than this KIRANA business. He further stressed that the disclosure or surrender of this additional business income has been made before the survey team, as per their full satisfaction, (subject to no penalty or prosecution) and the same has been accepted by the survey team. 6.6 He further submitted that the cash disclosure of Rs. 8 lakhs has flowed from the fact that there was huge rush of customers in the shop of the assessee , during the survey period , due to “ Sh Nabh Kamal Raja Sahib Mela ” , which is a religious festival and fair , locally organised , and langars are running , and since the assessee is a prominent trader in the area , lots of goods are supplied , through the challan book , where challans are drawn for instant record , by the sons of the I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 9 assessee, which subsequently is entered in computer system by the computer accountant, and forms a part of the gross sales. The total cash sales recorded in such challan books amounting to Rs. 8,10,200/-, (placed in paper book page 127), has been voluntarily surrender to buy peace of mind. He further relies upon the decision of Hon’ble Chandigarh Bench ITAT M/s Visvakarma Agro Industries vs ACIT in ITA No 2015/CHD/2023, to argue the point that cash found at the business premises of the assessee belong to the regular business of KIRANA and hence the same should be treated as business income of the assessee and taxed at normal rates (and provisions of section 115BBE of the Act 61, shall not apply in such cases). 6.7 He further submitted that the amount of Rs.50 lakh surrendered by the assessee on account of investment in building the source of the same has also come out of the regular business income of the assessee and the assessee is not having any other source of income other than the trading of kirana goods. He further stated that valuation of the building has been referred to the DVO u/s 142A of the Act, but without rejection of the books of account of the assessee produced before him in course of assessment proceedings. The entire investment made by the assessee in the said building has been duly recorded in the regular books of account. The total valuation of the property made by the DVO was Rs.3,20,45,500/- out of which the assessee’s expenditure as disclosed was Rs.2,58,55,480/- which accounts I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 10 for variation of only 19.30%. For the F.Y. 2018-19 (relevant to the assessment year under appeal), the DVO had determined an expenditure of Rs.61,97,043/- against the disclosure of the assessee at Rs.50 lakh which has resulted in an addition of Rs.11,97,043/-. On this ground the ld. AR of the assessee argued that the location of the property being in the city of Banga, which is a rural area in the State of Punjab the application CPWD rates (as applied by the DVO concerned) is not proper and the location being in the rural area of Punjab the local area rates should have been applied. 6.8 He further stated that CPWD rates are higher by 30% and besides if the personal supervision is taken into account further rebate of 15% is also to be allowed in the case of valuation of immovable property. He supported his argument on the basis of the Judgment of the Hon’ble Punjab Haryana High Court in the case of Rajesh Mahajan as reported in [2014] 50 taxmann.com 206 (P & H) High Court where it has been categorically held that CPWD rates are higher by 30% and further rebate of 15% is to be allowed for personal supervision. For the sake of clarification, the ld. AR has filed a chart which is reproduced as under: S. No. Particulars Amount Valuation as made by the DVO before making any allowance. 3,46,43,834/- Less: Self Supervision @ 15%. (DVO has allowed only 7.5% as self- supervision) 51,96,575.10/- Less used of old bricks @ 2% (the said 6,92,877/- I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 11 amount has been duly allowed by the DVO). Less: 30% allowance to be given on account bf application of CPWD Rates instead of PWD Rates 1,03,93,150.20/- Total valuation that should be considered after considering all the facts and circumstances of the case of the assessee. 1,83,61,232/- 6.9 By referring to the above chart, he argued that the total valuation should be considered at Rs.1.83 crore against which the assessee has already declared the investment at Rs.2.85 crore and as such, the addition of Rs. 11,97,043/- needs to be deleted on the merits of the case itself, also considering the fact that all the investment made by the assessee are duly recorded in the books of account and the books of account of the assessee has not been rejected. 6.10 He further relied upon the decision of ITAT, Chandigarh Bench in the case of Jasjot Singh Garcha vs. PCIT in ITA No. 378/Chd/2022 and also on the case of Durga Dass Surender Kumar and others in ITA No. 397/Chd/2022 to argue the point that there is a difference in between the treatment of undisclosed income and unexplained income and deeming provision of the Act should applicable only on unexplained income of the assessee, that is the income for which the assessee has not provided sufficient and adequate explanation. The mere fact that a survey has been conducted at the business premises of the assessee does not by default mandate the AO to invoke the deeming provisions. In the instant case, the assessee has filed its details and sufficient explanation in the course of scrutiny regarding I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 12 the income surrendered by the assessee to have come out of the activity of kirana business then the said surrendered should be treated as business income of the assessee particularly when the assessee does not have any other source of income. The ld. AR further relied synopsis as follows: “17. It is further submitted that the Ld. CIT has also relied upon the judgment of Hon’ble Punjab & Haryana High Court in the case of ‘Khushi Ram & Sons’ and that judgment had been extensively discussed/analyzed by the ‘Chandigarh Bench’ of the ITAT, in the case of M/s Khurana Rolling Mills, in ITA No. 745/CHD/2016 in which, the following facts have been mentioned:- i) “Para 6 page 9” of the judgments: The judgment has been quoted therein and the said issue in the case of M/s Khushi Ram & Sons have been discussed. ii) Then, the finding of the Hon’ble Bench have been discussed from para 9 at page 11, the judgment of ‘Famina Knit Fab’ have been discussed/analyzed and it has been mentioned therein, that in that case, the surrender was on accounted of undisclosed debtors, which was to be in the nature of business income and not deemed income. iii) Thereafter, it had been mentioned that in the case of ‘Famina Knit Fab’, the ITAT took note of the judgment of ‘Khushi Ram & Sons’ and that judgment of ‘Khushi Ram & Sons’ have been discussed in para 16 of the judgment of ‘Famina Knit Fab’. I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 13 iv) Thereafter, even in para 19, of the said judgment of ‘Famina Knit Fab’, it has been mentioned that since the surrender was made under the head ‘business income’ and, therefore, it was held that the debtors were generated from sales made by the assessee during the course of carrying on the business of assessee and, thus, it was to be treated as business income. v) This judgment of Famina Knit Fab has been extensively reproduced at pages 13,14,15,16,17,18,18,20, 21 & 22 in the case of Khurana Rolling Mills and then in para 19 at page 22, it has held to be business income. 18. Thus, from the above, it is very clear that the Hon’ble ITAT has considered the judgment of ‘Khushi Ram & Sons’ and analyzed at length and stated that the onus is of course on the assessee to explain the nature and source of income surrendered during survey and since, the assessee has stated during the survey in the case of ‘Famina Knit Fab’ as well as’ in the present case, that income declared during survey is the regular business income and same contention has been found to be correct as income from professional receipts, to be in order and it has been held, that it is the business income of the assessee. 19. Further, the judgment of ‘Khushi Ram & Sons’ has again been discussed in the case of ‘M/s Bindas Foods Pvt. Ltd.’, and at page 16, there is reference to the above said judgment of ‘Famina Knit Fab’. This has also been discussed in the case of ‘Khurana Rolling Mills’. I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 14 20. Further, in the case of Marshal Machines in ITA No.57/CHD/2017, the judgment of Khurana Rolling Mills have been quoted at length, in which, the judgment of Khurana Rolling Mills (P) Ltd. have been discussed, in which, judgment of ‘Famina Knit Fab’ has been discussed. 21. Further, in the Judgment of M/s Sardar Finance Co. in ITA No.157/CHD/2023, again the judgment of M/s Khushi Ram & Sons have been discussed and analyzed at length. 22. Thus, the judgment of “M/s Khushi Ram & Sons” having been discussed and analyzed in detail in the judgment of “M/s Famina Knit Fab” and further considered in other judgments as cited above, the applicability of provisions of deemed income u/s 69 of the Act and application of section 115BBE of the Act in the instant case of the assessee is uncalled for. 23. Hence, considering the said facts and circumstances of the case of the assessee, it is submitted that order passed by the Worthy CIT (A) u/s 250(6) of the Act should be quashed and the application of provisions of section 115BBE of the Act in the instant case of the assessee is uncalled for since, the surrender had been made by the assessee only on account of the business income of the assessee.” I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 15 7. The ld. DR on the other hand relied on the order of the ld. CIT(A) and referring to the judgments cited by the ld. CIT(A) in his appellate order argued that the assessee has not been able to adduce documentary evidence to establish the nexus between surrendered income on account of excess cash and investment in building. He further argued that in order to bring out any clear legal position for any income to be treated as business income the nexus has to be established and the said nexus in this case has not been able to establish to the satisfaction of the AO as such he prayed for sustaining the appellate order. 8. We have heard the rival submission at length and have considered all the materials on record and the contents of the paper book filed by the assessee and the judgment relied upon in support of his contention. It is apparent from the discussion, and the documents on record, that the assessee has got no other income other than the trading business of kirana goods and the department has also not been able to bring on record any other income activity of the assessee. 8.1 That the excess cash which has been surrendered before the survey team amounting to Rs.8 lac which are the sale proceeds of kirana goods which has been recorded in the challan book and the copy of the same filed in paper book, which amply proves that these are sale proceeds of goods which are regularly dealt by the assessee in his normal course of business and the nexus to such income disclosed is already evident from these challan books, and the cash that has been found at the I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 16 business premises. Regarding the surrender of Rs.50 lac by the assessee on account of investment in the building (shop room cum store), it is already stated by the assessee to have arisen out of income from kirana business. 8.2 It has already been stated that the assessee is not having any other source of income and this income is generated out of the regular business of the assessee. The revenue was not able to submit any evidence during the assessment and appeal proceedings that the said income declared by the assessee is not connected with the business income of the assessee or accumulated from the non-recognizing source. Hence, when all the income earned by the assessee are only from the business income of the assessee there do not arise any question as to the application of provisions of section 69A of the Act and hence taxing such income at special rate as per section 115BBE is not proper and legally not acceptable. It is also settled principles that when there is no other separate source of income identified during the course of survey or during assessment proceedings any income arising to the assessee shall be treated as out of the normal business activity. Regarding the issue of determination of the valuation by the DVO at Rs.3.20 crore, it is seen that CPWD rates has been applied and as per the Hon’ble Jurisdictional High Court in the case of Rajesh Mahajan (supra), the CPWD rates are higher by 30% and this property being located at remote place of Banga, Punjab, the CPWD rates needs to be subsidized by 30% and further rebate of 15% for self-supervision. The I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 17 difference has already been explained in the chart reproduced above and on this issue also we are in agreement with the submission of the assessee and we delete the addition of Rs.11,97,043/- which has been based on the valuation report. As a result, we hold that the income declared by the assessee as additional income will be charged to tax at normal rates and provisions of section 115BBE shall not apply. 9. In the result, the appeal of the assessee bearing ITA No. 44/Asr/2024 is allowed. Order pronounced in the open court on 18.10.2024 Sd/- Sd/- (Dr. M. L. Meena) (UDAYAN DAS GUPTA) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order I.T.A. No.44/Asr/2024 Assessment Year: 2019-20 18 "