TMI Blog2024 (1) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... 01819 relevant to assessment year 2019-20, however, in order to buy piece of mind, he voluntarily surrendered the sum - Therefore, during the course of survey, the assessee has failed to offer any explanation regarding the source of such capital introduced in his capital account. Even during the course of assessment and appellate proceeding, we find that no explanation is forthcoming from the assessee. We therefore find that basis material available on record, the credit entry in the capital account of the assessee clearly demonstrate that the receipt of money by the assessee and in absence of any explanation from the assessee explaining the source of such capital introduced, the provisions of section 68 are clearly attracted and we therefore affirm the findings of the ld CIT(A) as far as bringing to tax the amount under section 68 of the Act. Whether the AO has invoked the deeming provisions of section 69 and brought to tax excess stock found during the course of survey which is sustained by the ld CIT(A)? - In the instant case there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the Assessing Officer assessed these income under section 69 which concludes that these both officers are not definite about applicability of specific provision of law. 5. That the surrendered amount has wrongly assessed as deemed income whereas appellant has shown these income as business income in books in return of income as the appellant has no other source of income. 6. That the appellant, craves leave to add or amend any ground of appeal before appeal is heard or dispose off. 3. During the course of hearing the Ld. AR submitted that the survey operation u/s 133A was conducted on the business premises of appellant on 16/04/2018. During the course of survey, the appellant surrendered the amount of Rs. 31,77,029/- on account of excess stock of Rs. 17,07,029/- and credit entry in capital account of Rs. 14,70,000/-. These entries were duly disclosed in profit loss account of business concern. The appellant accepted the surrendered amount and shown this amount of Rs. 31,77,029/- as additional income over above business income in his return of income filed for A.Y 2019-20. During the scrutiny proceedings, the Assessing Officer assessed the surrendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,16,341.00 on account of difference in cash was treated and assessed as business income. That only issue/ground of appeal is that Assessing Officer was not justified in eyes of law/facts to assess income u/s 69 of Income Tax Act 1961 whereas appellant has correctly returned as business income further addition of Rs. 25,961.00 is also in dispute as ground of appeal No.4 of Form No.35 filed online. The written submission ground of appeal wise is as under. Ground of Appeal No.2 income of Rs. 14,00,000.00 wrongly assessed u/s 69 of Income Tax Act 1961 That Para No.2 of assessment order reveals the show cause notice reply of appellant thereof. The Assessing Officer raised the issue in show cause notice which is in the statement of assessee was asked to explain source of capital amounting to Rs. 14,70,000.00 introduced by the assessee in his capital account. However assessee failed to explain the source of Rs. 14,70,000.00 added during the year in the capital account. That appellant contended that addition in capital account is not covered u/s 69 and there is no justification in accordance of provision of law to assess as deemed income u/s 69 of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 (Pb Haryana High Court) v. In CIT Vs Shiv Shakti Timbers 229 ITR 505 vi. In Chatna Enterprises Vs ITO 238 ITR (AT) 103 Held in all decided cases that, The income from undisclosed source, if credited in books of account maintained by the assessee is liable to be assessed u/s 68 of Income Tax Act 1961 but if such income from undisclosed sources, though, invested had not been recorded in the assessee's books, than such income is liable to be assessed in terms of section 69 of Income Tax Act 1961. vii. In Roshan Lal Madan VS CIT 245 ITR (AT) 36 (Chandigarh) AND Jagmohan Ram Ram Chandra Vs CIT 274 ITR 405 held that, where firms books show credit in partners name for which there is no satisfactionery explanation, section 69 is not applicable for firm's assessment. viii. In Babu Lal C Borana 298 ITR 313 Bombay High Court held that, where the purchase transaction is recorded in regular books of accounts and the identity of vendor is disclosed, the amount cannot be included as unexplained investment u/ 69 of Income Tax Act 1961. That the Assessing Officer wrongly stress on the word as unrecorded and unexplained capital introduced. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 69 indicates that unexplained investment should be in the year immediate proceedings the assessment year. That excess stock was found at business premises of firm and the firm has no other source of income accepts the business income of manufacturing of agricultural implements. v. That the Assessing Officer did not considered the fact that in surrender letter the addition on account of excess stock was surrendered as over above business income and entry of surrender was made in trading account. vi. Following decided cases in which it was held that section 69 is not applicable on the excess stock found during the survey. The value of an unexplained investment not recorded in the assessee's books of accounts may be assessed as income. (i) 237 ITR 570 SC- CIT Vs Noorjaha. (ii) 247 ITR 105- CIT Vs Satyapalan. (iii) 251 ITR 671- CIT Vs Mahim. (iv) In Gaurish Steels (P) Ltd Vs ACIT (2015) 43 ITR (Tribunal) 414 Chandigarh ITAT held, Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of assessee. Further even the survey team has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating document which may held that the assessee advanced this said amount. The addition amounting to Rs. 25,961.00 is not justified rather the whole of the addition of surrendered amount of Rs. 2,16,341.00 is also not justified. The amount of difference in cash has wrongly been surrendered and the said amount has been taxed twice as on one hand excess cash was recorded in books of account and further specific addition/ amount surrendered by taxpayer. The issue may be considered with facts of the case. It is therefore requested that after considering the facts and legal decided case, the appeal of appellant may be accepted. 4. Per contra, regarding addition of Rs 14,00,000/- sustained u/s 68 of the Act, the Ld. Sr DR has submitted that the assessee has failed to offer any explanation about the nature and source of credit in the capital account of the assessee, has relied on the findings of the Ld. CIT(A) and our reference was drawn to his findings which are contained in para 5.2 of the impugned order which read as under: 5.2 Ground of Appeal No. 2 relates to addition of Rs. 14,00,000/- on account of unexplained investment as deemed income u/s 69 of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court held that the onus of proving the source of some of money found to have been received by an assessee is on him. In the case of Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1, the Hon'ble Supreme Court held that where the nature source of an receipt cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is income of the assessee and no further burden on the revenue to show that the income is from any other particular source. It has further been held by the Hon'ble Supreme Court in CIT vs. M Ganpati Mudaliar [1964] 53 ITR 623 and A Govindrajulu Mudaliar vs. CIT [1958] 34 ITR 807 that when the assessee has failed to prove satisfactorily the source and nature of the credit entry in his books and it is held that the relevant amount is income of the assessee, it is not necessary for the department to locate its exact source. The assessee has relied upon the judgment of Ld. ITAT Bench in the case of Gandhi Ram Village Sularharat in ITA No. 121/Chandi/2021. The said judgment relates to the issue of jurisdiction of PCIT u/s 263 and not exactly related to the issue under hand. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the value representing such excess stock as application of business income in absence of any evidence of earning that income or details as to when, how and from whom such income was derived 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. 17,07,029/- 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 69 of the Act is justified and the Ld. CIT(A) has rightly affirmed the order of the AO in treating the surrender of Rs. 17,07,029/- on account of unaccounted stock found during the course of survey as deemed income under section 69 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. 5. We have heard the rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessing officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. 6. In the instant case, it is an undisputed fact that a sum of Rs 14,70,000/- has been found credited as additional capital in the capital account of the assessee, the proprietor of M/s Satwant Agro Tech during the course of survey. The Survey team had asked a specific question to the assessee during the course of survey (question no. 23) to explain the source of capital introduced during the financial year 2018-19 relevant to assessment year 2019-20 and in response, the assessee had stated that he was unable to explain the source of capital introduced of Rs 14,70,00,000/- during the during the financial year 201819 relevant to assessment year 2019-20, however, in order to buy piece of mind, he voluntarily surrendered the sum of Rs 14,70,000/-. Therefore, during the course of survey, the assessee has failed to offer any explanation regarding the source of such capital introduced in his capital account. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts and the difference in the value of the stock so found belonging to the assessee has been determined. There is thus no dispute that there is a commonality 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. 9. The statement of the assessee recorded during the course of survey 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 findings of the survey team, the statement of the assessee recorded during the course of survey and other documents which are very much part of the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separate physical identity. It is to be only taxed under the head business . Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only. 15. In view of the above, AO is 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. 11. 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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