TMI Blog2022 (11) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... e surrendered income in the form of property and jewellery. Thus, there was failure on the part of the AO to accept the return of the assessee without enquiring as to if the income disclosed was actually business income only. In that way the assessment order was erroneous and prejudicial to the interest of revenue and rightly interfered by the PCIT. In the case in hand the difference in stock inventory was merely Rs. 3,75,000/-, difference in cash inventory was 9,75,000/-, advances to suppliers were 6,35,000/- which may be considered to be having nexus with the business but the investments of Rs. 38 lakhs in the plot and Rs. 3,46,500/- in jewellery have not been examined by the ld. AO as to if they were also proceed of undisclosed sales so as to be accepted in the return of income and on the rate of tax paid or to otherwise invoke provisions of 115BBE of the Act. ACIT has fairly directed the AO to inquire about applicability of Section 115BBE along with explanation 2 inserted by Finance Act, 2015. In the light of aforesaid discussion, the Bench is of considered opinion that impugned order does not require interference. There is no substance in the grounds. The appeal is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. It was of view that the Ld. AO failed to consider the same and the Ld. AO had failed to invoke the provisions of section- 68/69/69A/69B/69C of the Act on the above surrendered income as the same was clearly unexplained in nature, therefore, cannot be treated as normal business income and the A.O has also failed to enquire as to why the assessee had paid taxes at normal tax rate instead of maximum marginal rate as per Section-115BBE of the Act, which was clearly erroneous and prejudicial to the interest of revenue. 3. Accordingly notice u/s263 was issued and reply of assessee was considered and the Ld Revisional authority concluded; I have carefully examined the facts of the case and the submissions filed by the assessee. From the perusal of assessment record, it appears that the assessee had surrendered income amounting to Rs. 65,00,500/- during the course of survey u/s 133A, on account of unexplained cash, unexplained advances to suppliers and unexplained investment in plot and jewellery. For clarity the declaration filed by the assessee before the JCIT, Range Panipat dated 17.08.2016 during the survey was pasted and Ld Revisional authority observed:- Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, cannot be treated as normal business income and made tax computation at maximum marginal rate as per Section-115BBE of the Act. However, the AO had failed to do so. Therefore, the order of the AO was erroneous and prejudicial to interest of revenue. Consequently, a show-cause notice u/s 263(1) was issued to the assessee. In reply dated 06.03.2022 to the show cause notice, the assessee mainly relied on the ratio of case law of Hon ble ITAT in the case of Hari Narain Gattani vs DCIT, Circle, Jaipur regarding non-applicability of section -115BBE in his case. However, the fact of the present case is different from the said case law. In the mentioned case law, the Hon ble ITAT only held that the action of the Assessing officer in rectifying and increasing the rate of taxation from 30% to 60% and surcharge and cess on such undisclosed income doesn't come within the purview of section 154 of the Act. However, in the present case, the order of the AO is clearly erroneous and prejudicial to the interest of revenue for which proceedings u/ 263 of the act has been initiated. Hence, the reply submitted by the assessee is not acceptable being devoid of merits. In reply to show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draw any or all the above grounds of appeal before or at the time of hearing of the appeal. 5. Heard and perused the record. 6. It was submitted on behalf of the assessee that the coordinate bench in ITA No. 570/Del/2022 for Assessment Year 2017-18 in case of Shri Balwinder Singh Vs. Pr. CIT vide order dated 24.08.2022 has taken into consideration the similar circumstances where the ld Pr. CIT has invoked powers of section 263 in a case where the assessee had surrendered an income pursuant to a survey operation. It was submitted that the coordinate bench has held that section 115BBE before or after amendment does not provide that where the assessee surrender undisclosed income during the survey action for the relevant year the tax rate has to be charged as per provision of section 115BBE of the Act and the applicability of amended provision is debatable issue for which jurisdiction u/s 263 could not be invoked. It was submitted that the assessment order was passed by the Ld. AO after taking into circumstances that the surrendered income was business income and there was no error requiring invocation of powers of section 263. 7. On the other hand the ld DR submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied that the assessee has filed his income tax return declaring alleged amount of surrender of Rs. 65,00,500/- and has paid due taxes on the entire amount of surrender. However, has not accepted the claim of the assessee that the purchase of plot by wife of assessee was from her own resources. 11. However, the addition was made on ground that the ld AO was doubtful of the total sales for which he observed in para 5 of his order as under:- 5. Perusal of the impounded diaries reveals that the assessee has recorded the total sales approximately Rs. 50 lakh upto the date of survey i.e. 17.08.2016 which comes to Rs. 10,00,000/- per month approximately whereas the assessee has shown total sales at Rs.37.50 lakh in his Income Tax Return for the period from 01.04.2016 to 31.03.2017. The assessee has declared net profit of Rs.3,00,000/- @8% u/s 44AD of the Act. Accordingly, show cause notice was issued to the assessee on 22.12.2019 vide which he was asked as to why the total sales for the F.Y. 2016-17 may not be estimated at Rs. one crore. Further, the assessee was show caused as to why net profit @8% may not be applied which comes to Rs.8,00,000/- and addition of Rs.5,00,000/- (80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh which is over and above the sales shown at the time of survey. Thus, the assessee has himself admitted that there was total sale of Rs.50 lakh approximately upto the date of survey, therefore, it is justified to estimate the total sale of the assessee to Rs. One crore for the financial year under consideration. However, to meet the end of natural justice, the total sales declared upto the date of survey is considered upto Rs.50 lakh and reduced out of total sales determined for the whole financial year. Thus, the undisclosed sales is treated at Rs.26.50 lakh (One Crore - 73.50 Lakh) and net profit @8% i.e. Rs.2,12,000/- is determined and added to the taxable income of the assessee. I am satisfied that the assessee has miss reported his income to the extent of Rs.2,12,000/-, penalty proceedings under section 270A of the Income Tax Act, 1961 are initiated separately. [Addition of Rs.2,12,000/- With the above observations, total income of the assessee is computed as under: Total Returned Income 67,88,010/- Addition made as discussed in Para no. 5.1 2,12,000/- Total Assessed I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. 15. However, what has occurred in the present case is that the Ld. AO has not attempted to enquire as to if the surrendered amount was actually income from business only. The Ld. AO accepted the surrendered amount as assessee had filed return and paid tax upon the amount of surrender. Ld. AO on the basis of surrendered amount merely proceeded to revalue the reported quantum of sales and in that attempt escaped considering applicability of provisions of Section 115 BBE. 16. It is apparent that during survey the information collected had nothing to do with the business turn over alone and the investments were in jewellery and properties were also disclosed. The onus was on the assessee to establish that income from the business alone was used to acquire these and to the contrary that the Ld. AO had assumed the turn over exceeded the declared turn over to justify the surrendered income in the form of property and jewelry. Thus, there was failure on the part of the Ld. AO to accept the return of the assessee withou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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