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TMI Blog2025 (4) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... real estate development. For the Asst. Year 2017-18, assessee filed its Return of Income on 02-11-2017 declaring total income of Rs. 62,02,130/-. There was a survey action u/s. 133A of the Act carried out in the premises of the assessee on 29-09-2016 wherein physical stock to the tune of Rs. 30,11,941/- was found. The assessee admitted the above as undisclosed income in the statement recorded during the course of survey proceedings, however the assessee offered Rs. 30,00,000/- only in the Return of Income. Therefore the Assessing Officer made addition of Rs. 11,941/- as the undisclosed income of the assessee and completed the assessment. 2.1. On verification of the above assessment order Ld. PCIT found that the unaccounted income disclosed during the survey was calculated at the normal rate of 30% instead of undisclosed income chargeable to higher rate as provided u/s.115BBE of the Act, therefore the assessment order is found to be erroneous order and also prejudicial to the interest of the Revenue. Hence Ld PCIT issued a show cause notice dated 25-02-2022 to the assessee as to why not to assess the undisclosed income as per the provisions of Section 69C r.w.s. 115BBE of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unaccounted, the aforesaid amount was admitted as undisclosed income and it was agreed the same will be offered to tax. Thus, it must be noted that the discrepancy was between physical stocks found as against no stocks shown in provisional balance sheet reducing the business profit as on that date which was admitted. However, the physical stock was all out of purchases booked in the accounts only. In fact, the valuation of stock was also done from purchase bills duly accounted in the books There is NO UNDISCLOSED INVESTMENT in STOCKS or INVESTMENT IN STOCK NOT RECORDED in books or PURCHASES OUTSIDE BOOKS which are pre-requisites for applicability of S. 69C. It is a case of normal business profit being suppressed by not recording stocks lying physically but which were acquired out "accounted" purchases only. Hence, there is no question of "examining the sources of undisclosed income invested in stocks". It is a case of suppression of stocks for which regular purchases are already booked in the accounts and not undisclosed income invested in stock or unexplained investment in stocks. Thus, it will lead to additional business income in our hands and not income falling under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which increases the tax burden of the assessee has to be considered prospective and not retrospective. Also, the legislations which modify accrued rights or which impose obligations or which impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect The same is also supported by many other pronouncements of Hon. High Courts and also that of the Hon. Supreme Court like Kasimtharuvi Tea Estate Ltd. Vs. State of Kerala (1966) 60 ITR 262 and CIT Vs Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 Even the jurisdictional Hon. Gujarat High Court in case of AVANI EXPORTS & OTHERS VS COMMISSIONER OF INCOME TAX, RAJKOT & ORS GUJARAT (2012) 348 ITR 391 (GUJARAT) held that in case of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assesses. Similarly in (2015) Tax Corp (DT) 60727 (HC-GUJARAT) NIKO RESOURCES LIMITED Versus UNION OF INDIA the Hon. Gujarat HC held that substantive amendment can only be prospective in operation. In view of the above, it is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Here it is pertinent to mention that the amended provisions of Section 115BBE of the I.T. Act is applicable with effect from 01/04/2017 i.e. from the Α.Υ. 2017-18. The undisclosed income of Rs. 30,11,941/- in respect of unaccounted construction materials admitted during the course of survey is pertaining to the FY 2016-17 relevant to A.Y. 2017-18 and accordingly the amended provisions of Section 115BBE of the I.T. Act are clearly applicable in respect of the above undisclosed income of Rs. 30,11,941/-. However, as stated in the foregoing paragraphs, while finalizing the assessment, the Assessing Officer has not made any verification or inquiry regarding the applicability of the provisions of Section 69C r.w.s. 115BBE of the I.T. Act as also Section 271AAC of the I.T. Act in respect of the above undisclosed income of Rs. 30,11,941/- disclosed by the assessee on account of unaccounted stock of construction materials found during the course of survey u/s 133A of the I.T. Act. In view of the above facts, it is found that the Assessing Officer has finalised the assessment without verification or inquiry on the above issues which should have been made during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been treated as "undisclosed expenditure" u/s 69C, the provisions of S. 115BBE as amended from 15.12.2016 will apply and not those prevailing on the date of survey on 29.09.2016, and hence the disclosed income should have been taxed at higher rate of 60% instead of normal rate of 30%. 6. Heard rival submissions and perused the materials available on record including the Paper Book filed by the assessee. It is seen from Page No. 24 of the Paper Book namely Profit and Loss Account as on 31-03-2017 in the case of Park Paradise, a sum of Rs. 30,00,000/- is shown as unexplained income apart from closing stock of Rs. 24,55,32,712/-. It was done so that the amount will be clearly reflected in the profit and loss account that the assessee is offering the additional income accepted during the course of survey. In the Income Tax Return also, it was shown separately for fair and transparent disclosure only. But in the computation of income, the same is forming part of normal business income under the profit and gains of business. Thus, the disclosure of sum in the Profit and Loss and ITR by no means can leave to a conclusion, that there is some unexplained or undisclosed income which has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income been reduced by the amount of income referred to in clause (i) (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) and clause (6) of sub section (1)..." 7.1. We find that the issue of Amendment to Section 115BBE of the Act applicable from 01-04-2017 onwards is now settled by the judgement of the Hon'ble High Court of Madras in the case S.M.I.L.E Microfinance Limited Vs. ACIT reported in (2024) 121 CCH 0227 Chen HC. The relevant extract of the judgement is reproduced as under: "...16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense, deductions, set-off is allowed). PENALTY (Section 271AAC) If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%. Penalty for search seizure cases Penalty (271AAB) (i) 10% of income, if admitted. returned and taxes are paid (ii)20% of income, if not admitted but returned and taxes are paid (iii)60% of income in any other case Penalty (271AAB) (i) 30% of income, if admitted, returned and taxes are paid Not (ii) 60% of income in any other Taxation Investment Regime and for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) New Taxation and Investment Regime Undisclosed income in the form of cash & bank deposit can be declared: (A) Tax, Surcharge, Penalty payable Tax @ 30% of Income declared Surcharge @33% of Penalty @10% of Income declared Total @ 50% of Income (approx.) (B) Deposit 25% of declared income to be deposited in interest. Free Deposit Scheme for four years. Further, in the wake of declaring specified bank notes "as not legal tender", there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted stocks purchased from 01-04-2016 till the date of survey. Thus, respectfully following the above Judgement of the Madras High Court, there is no question of invoking provisions of section 115BBE of the Act. Thus the grounds of appeal of the assessee on the issue of Section 115BBE of the Act is hereby allowed and the revision order passed by Ld.PCIT is hereby quashed. 9. In the result, the appeal filed by the assessee in ITA No. 208/AHD/2022 is hereby allowed. ITA No. 207/AHD/2022 in the case of Park Plaza 10. The facts in the present case is identical with that of Park Paradise in ITA No. 208/AHD/2022. In this case, during the course of survey, assessee admitted Rs. 1,00,75,968/- as undisclosed income but offered Rs. 1 crore in the profit and loss account, therefore A.O. made the balance addition of Rs. 75,968/- as undisclosed income. Whereas in the Revision proceedings Ld. PCIT directed to assess the entire Rs. 1,00,75,968/- as undisclosed expenditure u/s. 69C and to tax the same u/s. 115BBE of the Act. 11. For the detailed reasons set out in Para 6 to 6.3 in ITA No. 208/Ahd/2022 will be squarely applicable to the facts of the present case. Thus the revision order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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