9911796707
TMI Blog2025 (5) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... es which were on record, namely the statement of the assessee made on oath at the time of survey on 18.01.018 and subsequently recorded on 01.02.2018, and the letter dated 22.10.2019, the reply dated 15.06.2021, which having neither been considered nor discussed, and invocation of Section 69 has been done without assigning any cogent and valid reasons while rejecting the explanation of the appellant as not satisfactory. 3. Because, due to inadvertent mistake the sum of Rs. 1.85 crores, difference of amount towards purchase of immovable property situated at 141A / 33A / 3 M.G.Marg, Allahabad, was omitted to be recorded in the books of accounts and not included in the return of income for the AY 2018 - 19 had paid due tax even though declared at the time of survey. 4. Because the assessee/appellant had suo-moto paid due tax of Rs. 57,16,500.00 vide challan number 00227 dated 22.10.2019, upon the sum of Rs. 1.85 crores, much before the query raised by the assessing authority vide questionnaire issued under section 142 (1) dated 23.01.2021, in assessment proceedings for the AY 2018-19. 5. Because the learned AO as well as CIT(A) were not legally justified in making the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (inadvertently left to be incorporated in the Income Tax return), as well as the reply dated 15.06.2021 in totality while rejecting the explanation of the appellant as not satisfactory. 2. Because the Ld. AO as well as Ld CIT (A) have overlook the vital documents which were on record, namely the statement made on oath at the time of survey dated 18.01.2018 and 01.02.2018 and the latter dated 22.10.2019 and the reply dated 15.06.2021 while making the addition of Rs. 1.85 lacs as unexplained investment for purchase of property, and charging it to the penal rate of tax u/s JI5BBE of the Act. 3. Because no reason much less any cogent reason have been assigned either by the Ld. AO or Ld. CIT (A) (while upholding the order of the Id AO) as to why the explanation of assessee found unsatisfactory, and as such, in absence of any reason, much less any cogent reason regarding the satisfaction which ought to have been based upon objective consideration for the purposes of the addition of Rs. 1.85 lacs as unexplained investment, and charging it to the penal rate of Tax as per Section 115BBE is highly arbitrary and unsustainable in the eyes of law. 4. Because the ingredients for invocatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the other two houses held by the assessee i.e. at Badshahi Mandi, Hewett Road and 2B/3 Kripa Narayan Mathur Marg, Katra, Allahabad, the ld. AO observed that it was an established fact that the assessee earned only rentals for occupation of premises on a daily basis. Moreover, he had appointed managers and also incurred expenses on the property. The assessee had also maintained a register for Badshahi Mandi, Hewett Road and 2B/3 Kripa Narayan Mathur Marg, Katra, Allahabad, which was stated to be produced before the ld. AO for verification. However, the ld. AO disputes that such registers were actually produced. Since the assessee had let this property out on a day to day basis and not produced any rent agreement/rent receipt, he held that the assessee was in the business of letting out property and therefore, the rental income was to be treated as business income. Furthermore, since the income from these properties had been disclosed on net basis in the return, the ld. AO held that no further deductions were allowable to the assessee other than the income declared. Therefore, he disallowed the deduction under section 24(a) amounting to Rs. 7,03,585/- on these properties. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to M/s A.B. Traders of Rs. 2 Lacs and M/s Narayan Marketing of Rs. 1,96,606/-. Accordingly, the ld. AO treated the credits from these two parties as unexplained and brought them to tax. 5. Aggrieved with these additions, the assessee went in appeal before the ld. CIT(A). With regard to the disallowance of deduction under section 24(a) from the house property and the disallowance of house tax of Rs. 52,718/-, the assessee submitted that the details regarding the deposit of house tax had been furnished before the ld. AO and ought to have been allowed. On the issue of deduction under section 24(a), it was submitted that the assessee used to purchase the house property as investment and not for renting the same for business purposes. However, being a prudent businessman, he had also availed the opportunity and given his properties on rental basis to get additional income and paid tax on the same to the government exchequer. He had given his properties at Badshahi Mandi, Hewett Road and 2B/3 Kripa Narayan Mathur Marg, Katra, Allahabad to travelers and pilgrims on rent because it fetched more rent. To take care of each of the properties, the assessee had deployed one manager and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 68 of the Income Tax Act, it was submitted that due to the Covid-19 pandemic, it was difficult to obtain confirmation from the sundry creditors. However, it enclosed the copies of ledger accounts of the sundry creditors and the bills and bank statement with a request that the ld. CIT(A) may not take an adverse view of the matter. 6. The ld. CIT(A) duly considered the arguments of the assessee and on the various issues raised before him, he ruled as under:- a. That house tax was allowable to the assessee whether the income was assessed to tax either as income from business or income from house property. Accordingly, the ld. AO was directed to allow the deduction of house tax. b. In view of the fact that the assessee had given two of his premises for rent on a day to basis and appointed a manager for each property, he held that the assessee was in the business of letting out properties and accordingly, he confirmed the decision of the ld. AO to treat the income from those two properties as business income and disallow the deduction under section 24(a). c. With regard to the investment of Rs. 1.85 Crores, the ld. CIT(A) observed that where the assessee had made investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AO to bring it to tax under the provisions of section 115BBE, it was submitted that since there was no mala fide intention on the part of the assessee to escape or conceal any part of the due tax due to the government exchequer, which was evidenced by the payment of the said tax before the issue of notice under section 142(1), the provisions of section 69 and consequently section 115BBE would not apply. The Ld AR further argued that to apply the provisions of Section 69, the twin conditions that triggered the liability for assessment under section 69 had to be fulfilled i.e. that the investment was not recorded in the books of account and that the assessee did not provide an explanation of the nature and source of those investments or that the explanation provided was not satisfactory in the opinion of the Assessing officer, only then could the investment be deemed to be his income. The Learned AR submitted that in the present case the assessee had explained the nature and source of the investment and therefore he could not be burdened with the provisions of section 69 as the second ingredient was not met Furthermore the Ld AR submitted that if the AO was not satisfied with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and paid capital gains tax on it. It had then been submitted by the assessee that this consideration had partly been paid in cash and partly been paid in gold and silver. Ld Sr DR further submitted that but for this chance finding at the premises of the other party, the matter would never have been disclosed. It was further submitted that no books of accounts were found during the survey and only loose documents were found. Therefore, all the circumstances indicated that there was never any intention to disclose the said amount to tax. The ld. Sr. AR also filed a paper book and invited our attention to page 13 of the paper book in which he submitted that vide a letter dated 29.01.2018, there had been an attempt to partially retract from the earlier disclosure made by the assessee on 18.01.2018 and submit that there was no undisclosed investment in the purchase of any property other than a flat which was being purchased by him. Further, the earlier disclosure of Rs. 5.57 Crores had been reduced to Rs. 5 Crores by the assessee in this letter. The ld. Sr. DR further pointed out that only when the statement was re-recorded on 1.02.2018 that the assessee had confirmed the earlier dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned sum was not recorded in the books of accounts, vouchers were not found with the assessee and no primary documents were found from the assessee. It is only after the initiation of assessment proceedings when the apparent discrepancy had already been discovered by the Income Tax Department and was sought to be subjected to test during the scrutiny, that the assessee came forward and paid tax thereon. Therefore, the disclosure was not voluntary. The ld. Sr. DR invited our attention to the decision in the case of MAK Data Private Limited vs. CIT 2 (2013) 38 taxman.com 448 (SSC) wherein the Hon'ble Supreme Court had held that voluntary disclosure did not release the assessee from the mischief of penal proceedings under section 271(1)(c). He particularly invited our attention to para 7 and 9 of the said order, wherein the Hon'ble Supreme Court had held that the ld. AO should not be carried away by the plea of the assessee on issues like voluntary disclosure, buying peace, avoiding litigation or amicable settlement to explain away its conduct. The question whether the assessee had offered any explanation for concealment of particulars arose as a presumption when a difference is notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed special rates of tax for additions made under section69 and 69B and the same was also applicable to income being declared in the return itself which was apparent from a reading of section 115BBE 1(a). Therefore, he argued that the moment the Department had laid its hand upon incriminating material showing unrecorded income, even if he were to incorporate the same in his return of income, it would still be hit by the provisions of section 115BBE. The ld. Sr. DR further submitted that the assessee says that he had explained the sources from undisclosed business income / rental income. But the source did not mean the head of income. He submitted that the details of disclosure had to include the source from which the black money had been generated. Therefore, it was a fit case to be assessed under section 115BBE and no interference was called for in this regard. With regard to the denial of deduction under section 24(a), the ld. Sr. DR submitted that the assessee had not filed any rent agreement with respect to the property at Kripa Narayan Mathur Road or Hewett Road. Also with regard to the property of Hewett Road, no information had been filed. The assessee was engaging a manager ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to various tourists and pilgrims, to collect the rents and to deposit the rents with the assessee, after accounting for necessary expenditures in this regard. It is also evident that unlike properties which are rented out on long term basis, individual rooms or tenements rented out for a day cannot be rented out as bare tenements, because the daily occupiers would not be persons who would be visiting with their entire complement of furniture and beddings etc. In the circumstances, whether it is stated or not, it is fairly evident that the assessee was not only renting out the property on a day-to-day basis but that the only way that he could do it, was also by providing certain facilities to those who would be taking the premises on rent or arranging for such facilities to be provided to them, by third parties. Therefore, it clearly seems to be an organized activity of a composite nature and the Courts have held that when the assessee runs an organized activity of a composite nature towards the earning of income, it is to be treated as income from business. We also note that the decision of the Ld CIT(A) to accept the income from House property in the case of the wife of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made this investment from his previously undisclosed business income and rental income, he did not undertake the exercise to bring those undisclosed incomes to tax. Therefore, to our mind, by choosing to offer the same to tax in that very previous year without stating how or when the income was generated, he subjected himself to the rigours of section 69/69B. It is further pertinent to note that the assessee reiterated the disclosure made during the survey, in a subsequent statement on 1.02.2018. The assessee was also given copies of all the impounded materials well before the filing of his return. However, the assessee did not include the said amount of Rs. 1.85 Crores in either his books of accounts, or in his audited accounts, or in his return. Consequently, the amount remained undisclosed at the time of filing of the return. It is further observed that even if the assessee could not revise his return after 31.12.2018, nothing prevented him from paying the tax on the undisclosed investment that had been owned up by him at the time of survey. In fact these taxes were not paid for nearly one year and 10 months after the date of survey. So all these factors would indicate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a proper explanation of the nature and source of the hitherto undisclosed investment and only when the same was offered could the question of whether it was satisfactory or not be addressed. But the letter dated 22.10.2019 we note that the assessee has not even admitted that the investment was made from undisclosed sources and has in fact only admitted that he inadvertently left it out while preparing his return of income. There is no explanation regarding the nature and source of such investments at all. We further observe that the Hon'ble Supreme Court in the case of MAK Data Pvt. Ltd. vs. CIT (supra) has held that the only valid disclosures are those which are made in accordance with the scheme laid down in the Act and that subsequent disclosures would not absolve the assessee from penal consequences, if the conduct of the assessee shows an intention to conceal and in the present case, we note that the conduct of the assessee over nearly two years shows the intention to conceal. Therefore, the ld. AO was right in bringing that portion which had not been disclosed to tax under the special provisions of section 69 and would be bound to thereafter levy the tax under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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