DCIT Vs Shri Krishna Kumar Verma (ITAT Indore)
Sections 68,69,69A,69B,69C and 69D may be called as Section 68 & 69 Family. However, they differ in as far as Burden of Proof is concerned. In sec 68, the onus is wholly upon the Assessee to explain the source of the entry. But in cases falling under sec 69, 69A, 69B and 69C, the words used show that before any of these sections are invoked, the condition precedent as to existence of investment, expenditure, etc. must be conclusively established by material on record/ evidence.
Section 101 of The Indian Evidence Act, 1872 specifies that Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.
In Mad HC in N Swamy 241 ITR 363 relied by Chennai ITAT in Omega Estates and Chd ITAT in Dr. R.L.Narang, it was held that The burden of showing that the assessee had undisclosed income is on the revenue.
In ITO vs. Mrs. Deepali Sehgal (ITAT Delhi), ITA No. 5660/Del/2012, the AO noted that assessee had withdrawn huge cash from bank account and the same amount had been deposited to the same account after lapse of substantial time. The AO rejected the explanation and held that the assessee hadcash deposit of Rs.24,38,000/- as unexplained money and the assessee found to be the owner of the money as he had not offered any acceptable and cogent explanation. AO, in his remand report could not bring out any fact that the cash withdrawn from Saving Bank Account and partnership overdraft account was used for other purpose anywhere else then, merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. Hence, the addition made by AO without any legal and justified reason was rightly deleted by the CIT (A).
The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68,69,69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017.
Where the assessee includes surrendered amount of excess stock and excess cash in the return of income filed in response to notice u/s 153A of the Act and it was accepted, no further addition u/s 69A or 69B of the Act can be made against the assessee.
In the case of ACIT vs. Shri Anoop Neema, reported as 2022 (1) TMI 683-ITAT Indore, the alleged excess stock was admitted as a part of the total business stock found at the assessee’s business premises. It was considered as sufficient to indicate that the alleged investment in excess stock is part of the business income and that allege excess stock accepted by the assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during the search proceedings and, thus, the same cannot be treated as income from undisclosed source of income and the Ld. CIT(A) was right in holding that the provisions of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search.
Where the assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee and The CIT(DR) could not dislodge the contention and observations that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee, the impugned income will not be entangled in the clutches of Section 69/69A/69B of the Act and therefore do not warrant application of Section 115BBE of the Act at all. The same was held in the case of DCIT(CENTRAL)-2 INDORE Vs SHRI KRISHNA KUMAR VERMA [2023-VIL-283-ITAT-IND]
FULL TEXT OF THE ORDER OF ITAT INDORE
This appeal has been filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”, for short], dated 31/01/2020 for Assessment Year 2017-18.
2. The sole ground raised by the Revenue which read as follows:
” On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in law in allowing the assessee’s appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act applicable w.e.f.1.04.2017 relevant to AY 2017-18 which are clearly attracted in the case of the assessee, in respect of the surrendered income of Rs.4,53,43,587/- determined u/s 69B of the Act which was offered for taxation in the return of income filed for the A.Y.2017-18.
3. The Ld. Senior Departmental Representative (“Sr. DR” for short) supporting the action of the Assessing Officer (“AO” for short) on the issue of chargeability of tax u/s 115BBE of the Income Tax Act, 1961 (for short ‘the Act’) submitted that the Ld. CIT(A) in the facts and circumstances of the case, was not justified in law allowing the assessee’s appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act, which is applicable from 01/04/2017 relevant to A.Y. 2017-18. The Ld.Sr. DR for the Revenue submitted that the said provisions is clearly attracted to the present case of the assessee in respect of the surrendered income determined u/s 69B of the Act which was offered for taxation in the return of income filed by the assessee for A.Y. 2017- 18.
3.1 Further drew our attention towards relevant part of the assessment order. The Ld. Sr. DR submitted that the income surrendered by the assessee that during the course of search action in reply to question No.16 to 17 by the statement of the assessee recorded on 29/09/2016, the assessee himself admitted the facts that the excess stock and excess cash found pertains to Adat/dalali business of bullion, gems & property, which was recorded in the books of account. Therefore, the AO was right in calculating the chargeability of taxas per amended provisions of section 115BBE of the Act. He further submitted that the total amount surrendered on account of excess cash and excess stock was treated by the AO as unexplained money u/s 69A of the Act and unaccounted investment u/s 69B of the Act respectively and was rightly taxed u/s 115BBE of the Act. The Ld. Sr. DR placed vehemently reliance on the judgment of Hon’ble Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. Commissioner of Income Tax reported as [2013] 35 taxamann.com 456 (P&H)submitted that where the amount surrendered during the survey was not reflected in books of account and no source from where it was derived was declared by assessee, it was assessable as deemed income of assessee under section 69A and not business income of the assessee u/s 69A of the Act and not as business income. The Ld. Sr. DR finally submitted that in the facts and circumstances of the case the Ld. First Appellate Authority has granted relief to the assessee without justifying any reason and basis, therefore, the impugned first appellate order may kindly be set aside by restoring the order of the AO.
4. Reply to the above, the Ld. Assesees Representative (“AR” for short) drew our attention towards assessment order and submitted that the assessee including surrendered amount of excess stock and excess cash in the return of income filed in response to notice u/s 153A of the Act and the Assessing Officer has accepted the return income shown in the return filed u/s 139 (1) of the Act as assessed income of the assessee. He further explained that no further addition u/s 69A or 69B of the Act has been made against the assessee in the assessment order.
4.1 Further drawing our attention towards relevant operative part of the first appellate order. The Ld. AR submitted that the assessee has been trading in the business of Jewellery and the excess stock found during the course of search and survey was accumulated from transaction of metal of bullion carried out in the forward commodity trading and mediation. He further submitted that the surrendered amount was pertaining to excess stock and excess cash which was business income of the assessee and the additional income offered was nothing but business income of the appellant and therefore, liable to be taxed under the head of income from business and profession only and the AO without making any addition u/s 69A or 69B of the Act accepted the surrendered amount as income from business and profession. He vehemently pointed out that the AO has not bring on record any other evidence suggesting that the additional income was not earned by the declared business activity of the appellant. He also pointed out that the provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68,69,69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017. He further explaining that in the present case the additional income was offered during search and survey operation carried out on 28/09/2016 and the same has been taken into consideration while filing regular return of income u/s 139(1) of the Act and when the assessment has been framed and completed at returned income without making any fresh addition then the AO was not justified in charging tax u/s 115BBE of the Act on the surrendered amount. The Ld. AR, vehemently supporting the first appellate order, submitted that the proposition rendered by the Hon’ble Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. CIT (supra) does not apply to the present case as the assessee has sucessfully explained the source of surrendered excess cash and excess stock as has been derived from business of the assessee trading into Bullion and commodity stock market, Adat/dalali therefore, peculiar facts and circumstances of the present case, the Ld. CIT(A) was right in dismissing the stand of AO on chargeability of tax u/s 115BBE of the Act.
4.2 Further placing reliance on the order of Co-ordinate Bench of ITAT, Chandigarh in the case of Famina Knit Fabs vs. ACIT, reported as [2019] 104 taxmann.com 306 (Chandigarh-Trib.) submitted that amendment made to section 115BBE w.e.f. 01/04/2017 made by Finance Act, 2016 is prospective in nature, and Revenue could not claim the same to be either clarificatory in nature or retrospective in operation. The Ld. AR pointed out that in this order, it was categorically held that if during the search operation, the assessee surrendered additional income on account of unaccounted receivables which were partly assessable as deemed business income and partly assessable as deemed income under sections 68 to 69Cas the part of business income then amended provisions of section 115BBE of the Act is not applicable.
4.3 Further placing reliance on the another judgment of the ITAT, Indore Bench in the case of ACIT vs. Shri Anoop Neema, reported as 2022 (1) TMI 683-ITAT Indore, the Ld. AR submitted that the Ld. CIT(A) find that the alleged excess stock was part of the total business stock found at the assessee’s business premises are sufficient to indicate that the alleged investment in excess stock is part of the business income and that allege excess stock accepted by the assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during the search proceedings and thus, the same cannot be treated as income from undisclosed source of income and the Ld. CIT(A) was right in holding that the provisions of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search.
5. On careful consideration on rival submissions, first of all from the first appellate order, we have noted that the Ld. CIT(A) has granted relief to the assessee by following observations and findings:
4.1 Ground No. 1 to 5:- Through this ground of appeal, the appellant has challenged the chargeability of tax rate under amended provisions of section 115BBE of the Act. During the course of search on 28.09.2016 excess stock in the form of jewellery and silver utensils worth Rs.1,28,48,827/- were found and cash amounting to Rs.1,57,01,227/- was found from residential premises of the appellant. Further, during the course of survey excess stock of jewelleries amounting to Rs.1,67,93,53/- was also found. Statement of appellant was recorded u/s 132(4) & 133A of the Act and appellant made voluntary disclosure of sum of Rs.4,53,43,587/- on account of excess stock and cash found during the course of search and survey. The appellant also stated that the excess stock was acquired out of income earned from forward commodity trading transaction and mediation carried out by the appellant. The appellant filed return of income u/s 139(1) on 31.10.2017 declaring total income of Rs.5,30,55,260/- including additional income of Rs.4,53,43,587/- voluntary declared during the course of search and survey. However, as per AO, the details and evidences furnished by the assessee are nothing but an afterthought and therefore, subsequent addition was made in the income of the appellant by applying tax rate as per amended provisions of section 115BBE of the Act.
4.1.1 First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017 (from FY 2017-18 onwads). However, the AO has applied amended provisions in FY 2016-17 applying retrospective effect of the said amendment. Hon’ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC): (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that “An amendment made to the taxing statute can be said to be intended to remove ‘hardships’ only of the assessee, not of the department-on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon’ble ITAT Indore in the case of Priyadharshani Construction vs. ITO (2012) 19 ITJ 276 (Trib-Indore) has held that “Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Similar view was taken in following judgments by various courts and tribunals:-
