TMI Blog2023 (12) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... horities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B and the same has to be assessed to tax under the head business income . In absence of deeming provisions, the question of application of section 115BBE doesn t arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head Income from Business/profession and apply the normal rate of tax. Assessee appeal allowed. - Shri. Aakash Deep Jain, VP And Shri. Vikram Singh Yadav, AM For the Assessee : Shri Sudhir Sehgal, Advocate For the Revenue : Shri Dharamvir, JCIT, Sr. DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id statement is placed in the paper book at page no. 39-44. 6. It was submitted that the assessee credited the said amount of Rs. 50,00,000/- in its profit and loss account for the year ending 31.03.2019 and the said books of account were audited by a Chartered accountant. Therefore, on the basis of audited financial statements, the assessee filed its return of income on 30.09.2019 wherein, a total income of Rs. 1,40,22,393/- was declared which includes the surrendered amount of Rs. 50,00,000/-. It is pertinent to mention on the said amount of Rs. 1,40,22,393/-, the assessee paid tax at normal rate of tax. 7. Thereafter, the case of the assessee was selected for scrutiny under compulsory scrutiny assessment as per the guidelines of CBDT and a notice u/s 143(2) of the Act was issued to the assessee on 29.09.2020. Thereafter, the assessee was issued a notice u/s 142(1) of the Act dated 20.01.2021 along with a detailed questionnaire. The copy of the same is placed in the paper book at page no. 45-49. The assessee in response to the said notice, filed various replies. The copy of the screenshot of the IT portal account of the assessee depicting the replies filed by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stock belongs only to the business of the assessee. 11. It was submitted that after surrender of Rs. 50,00,000/-, the assessee credited the said amount in its profit and loss account prepared for the year ending 31.03.2019. Hence, the assessee paid tax on surrendered amount of Rs. 50,00,000/- at normal rate of tax. In addition to this, the assessee also recorded the said stock in the books of account. Now, as there is no other source of income of the assessee other than the business income earned by the assessee and the said fact has been duly accepted by the department and it is a settled principle in law that when there is no other source of income identified during the course of survey or during the course of assessment proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only and hence, the surrender amount of Rs. 50,00,000/- on account of excess stock should be treated as the business income of the assessee. Reliance in this regard is placed on the judgment in the case of Daulat Ram Rawatmull vs. CIT [1967] 64 ITR 593, wherein Calcutta High Court held as under: 61. In the instant case the assessee is a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the assessee at the rate of 60% in terms of provisions of section 115BBE of the Act. In the case of M/s. Sham Fashion Mall in ITA No. 315/CHD/2022, the Hon ble Chandigarh Bench of ITAT has held as under: 12.0 In ITA No. 315/CHD/2022, in the case of Sham Fashion Mall, the only issue before us is the challenge to the provisions of section 115BBE by the AO and its sustenance by the Ld. CIT-(A). In this case the returned income has been accepted by the AO. We have also gone through the assessment order as well as the order of the Ld. CIT-(A) and it is seen that nowhere in the orders of both the lower authorities is there any fact brought on record or even a whisper of any allegation against the assessee that the assessee had any other source of income except income from business and income from other source. There is no iota of evidence to even suggest that the lower authorities had unearthed any other so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income. 9. In view of this, since the aforesaid surrender is not covered under the provisions of Section 68, 69, 69A, 69B, 69C and 69D, the provisions of Section 115BBE are not attracted in this case. 10. In view of the above, the action of the lower authorities in invoking provisions of Section 115BBE on the surrender income of Rs. 15 lacs is set aside and the AO is directed to compute the said surrendered income under normal provisions as applicable to the business income of the assessee. 11. In the result, appeal of the assessee stands allowed. The Hon ble Chandigarh Bench in the case of The DCIT vs M/s Khurana Rolling Mills Pvt. Ltd. as reported in ITA No. 745/CHD/2016: 9. In the facts of the present case, it is not disputed that the surrender had been made on account of undisclosed debtors. Since the facts are identical to that in the case of Famina Knit Fabs (supra), and no distinguishing facts have been brought to our notice by the Ld. DR, the decision rendered in that case will also apply to the present case, following which we hold that the Ld. CIT(A) had rightly treated the surrendered income as in the nature of business income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed under the business income , then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee. 14. It was further submitted that Section 115BBE of the Act does not state the head of income in which the income of the assessee stands taxable, hence, in such circumstances, the Ld. AO has to look into surrounding circumstances to determine under which the income of the assessee should stand taxable and in this regard, it is hereby submitted that as the assessee has been filing its return of income since past many years and the facts and circumstances of the case of the assessee hereby represent that the assessee has been showing his income under the head income from business and not under any other source of income. 15. Without prejudice to the above, it was submitted that during the course of survey action at the business premises of the assessee on 29.08.2018 as well as during the course of assessment proceedings, the Ld. AO has not passed any adverse opinion with respect to any other source of income of the assessee, neither the AO has brought on record any adverse material on record. Hence, the business income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been invested in stock. It was submitted that the assessee has not been able to establish nexus between the excess stock and normal business income. Further no documentary evidence has been submitted to justify the additional income of Rs. 50,00,000/- as business income. It was accordingly submitted that the action of the AO in applying the rate as prescribed u/s 115BBE of the Act on the surrendered income included in the tax return and which has been treated by the AO as income under section 69B of the Act is justified and the Ld. CIT(A) has rightly affirmed the order of the AO in treating the surrender of Rs. 50,00,000/- on account of unaccounted stock found during the course of survey as deemed income under section 69B of the Act and which has been brought to tax as per the provisions of Section 115BBE of the Act. It was accordingly submitted that the order so passed by the Ld. CIT(A) be confirmed and the appeal so filed by the Assessee be dismissed. 18. We have heard the rival contentions and purused the material available on record. The AO has invoked the deeming provisions of section 69B and brought to tax excess stock found during the course of survey which is u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nality in the stock so found and as recorded in the books and in absence of which, the comparison would not have been possible and difference would not have been worked out. The Revenue has not pointed out that the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. There is thus a clear nexus of stock physically so found with the stock in which the assessee regularly deals in and recorded in the books of accounts and thus with the business of the assessee and the difference in value of the stock so found is clearly in nature of business income. The statement of the partner of the assessee firm is available on record and related documents so found during the course of survey are stated to be in possession of the Revenue authorities. Apparently, the AO has failed to take into consideration the statement of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Further, in the surrender letter dated 30/08/2018, the assessee has stated that during the course of survey operations, certain discrepancy out of excess stock of Rs 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the assessee and sought to tax the difference between book-stock and physical-stock as unaccounted investment under section 69 without considering the claim of the assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 13. Thus in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed to consider the sum of Rs. 8,10,011/- as undisclosed business income assessable under the head business and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO. 22. In the instant case as well, there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. 23. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brough ..... X X X X Extracts X X X X X X X X Extracts X X X X
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