Bal Krishan Vs PCIT (ITAT Chandigarh)
ITAT Chandigarh held that the income so surrendered by way of account receivables cannot be brought to tax under the deeming provisions u/s 69 r/w section 115BBE of the Income Tax Act.
Facts- A survey operation u/s. 133A was conducted at the business premises of the assessee on 31/08/2016. During the course of survey proceedings, certain discrepancies were noticed and confronted to the assessee and the assessee offered a sum of Rs. 2,02,00,000/- as additional income over and above the normal income and in the return of income so filed by the assessee, the assessee has declared the said income as additional business income and tax thereon was calculated at normal rate. Subsequently, the assessment was completed u/s. 143(3) dt. 30/12/2018 at an assessed income of Rs. 1,99,81,908/- accepting the returned income so filed by the assessee and making an adjustment of Rs. 2,00,000/- to the returned income.
Thereafter, the assessment records were called for by the Ld. Pr. CIT(Central), Ludhiana and a show cause u/s. 263 dt. 26/03/2021 was issued and thereafter, after considering the submissions of the assessee, the assessment order passed by the AO was held as erroneous in so far as prejudicial to the interest of the Revenue and the same was set aside to be made afresh in accordance with the findings and the directions in the impugned order and which are under challenge before us.
Conclusion- In the instant case, the factum of the matter is that the surrender was made and accepted by the Survey team in the hands of the assessee, being the partner of the concern for reasons best known to both the parties, the same will however not change the nature of surrendered income being on account of account receivables generated out of book sales undertaken by the concern in which the assessee was a partner.
Held that the income so surrendered by way of account receivables cannot be brought to tax under the deeming provisions u/s 69 r/w section 115BBE. In the result, the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
These are three appeals filed by respective assessees against the separate orders of Ld. Pr. CIT(Central), Ludhiana each dt. 31/03/2021 passed u/s 263 of the Act pertaining to Assessment Year 2017-18.
2. All these appeals were heard together and are being disposed off by this consolidated order.
3. The Registry has pointed out that all the above appeals have been filed with a delay of 198 days beyond the prescribed period. In response, the aforesaid assessees have filed respective application seeking condonation of delay which is placed on record. During the course of hearing, the ld. AR reiterated the contents in the aforesaid applications and submitted that the delay occurred due to Covid-19 pandemic and it was requested that the delay may be condoned. The ld. Sr. DR didn’t controvert the aforesaid contention of the ld AR. After hearing both the parties and considering the material placed on record, the delay of 198 days in filing the present appeals by the aforesaid assessees is hereby condoned as we find that there was reasonable cause beyond the control of the assessee on account of Covid-19 pandemic and the appeals are hereby admitted for adjudication.
ITA No. 409/Chd/2021
4. With the consent of the parties, the case of the assessee in ITA No. 409/Chd/2021 was taken as the lead case. In this appeal, the assessee has raised the following grounds of appeal:
i. “That the initiation of proceedings u/s 263 by the Learned Pr. CIT (Central), Ludhiana are against the facts and bad in law.
ii. That the Learned Pr. CIT (Central), Ludhiana has erred in initiating the proceedings & in passing the order u/s 263 of the IT Act, 1961 and directing the AO to assess the surrendered income during survey of Rs. 2,02,00,000/- as unexplained income and tax the same under section 115BBE of the IT Act, 1961 and make fresh assessment.
iii. That the Learned Pr. CIT (Central), Ludhiana has erred in finding that assessment already framed was erroneous & prejudicial to the interest of revenue as the assessment was framed by the AO after thorough investigation & proper application of mind.
iv. That the worthy PCIT, Patiala has erred in applying Explanation 2 to section 263 inserted w.e.f 01.06.2015 as the concerned Assessing Officer had duly made appropriate enquiries and applied his mind and assessed the income offered during survey as business income.
v. That in any case the order of the Learned Pr. CIT (Central) passed u/s 263 is against the law and deserves to be quashed.”
5. Briefly the facts of the case are that a survey operation under section 133A was conducted at the business premises of the assessee on 31/08/2016. During the course of survey proceedings, certain discrepancies were noticed and confronted to the assessee and the assessee offered a sum of Rs. 2,02,00,000/- as additional income over and above the normal income and in the return of income so filed by the assessee, the assessee has declared the said income as additional business income and tax thereon was calculated at normal rate. Subsequently, the assessment was completed under section 143(3) dt. 30/12/2018 at an assessed income of Rs. 1,99,81,908/- accepting the returned income so filed by the assessee and making an adjustment of Rs. 2,00,000/- to the returned income.
6. Thereafter, the assessment records were called for by the Ld. Pr. CIT(Central), Ludhiana and a show cause under section 263 dt. 26/03/2021 was issued and thereafter, after considering the submissions of the assessee, the assessment order passed by the AO was held as erroneous in so far as prejudicial to the interest of the Revenue and the same was set aside to be made afresh in accordance with the findings and the directions in the impugned order and which are under challenge before us.
7. During the course of hearing, the Ld. AR referred to the show cause under section 263 of the Act issued by the Ld. Pr. CIT(Central)and our reference was drawn to the para 3 to 6 of the show cause notice which read as under:
“03. The records of the assessment proceedings have been examined. It is observed that the assessment in this case was completed and the tax was calculated at normal rates. The assessee has voluntarily declared an amount of Rs. 2,02,00,000/-as additional income over and above the normal income for the A.Y. 2017-18. The tax was calculated by the assessee at normal rate and accordingly paid the taxes. However, in this case the assessee had declared undisclosed income and hence, this case falls under the ambit of section 68/69/69A/69B/69C of the IT Act, 1961, which is to be taxed u/s 115BBE of the Income Tax Act, 1961.
04. Section 115BBE of the Income Tax Act provides that where the total income of an assessee includes any income referred to in Section 68, Section 69. Section 69A, Section 69B, Section 69C or Section 69D (specified income) and such income is (a) reflected in the return of income furnished Section 139; or b) which is determined by the Assessing Officer. Then, income tax payable in respect of such income would be @60% u/s 115BBE.
05. In this case, the returned income includes an amount of Rs. 2,02,00,0007-being the undisclosed income, the tax applicability of the section 115BBE to be applied for the tax computation purpose whereas in the returned income, tax was calculated at normal rates. This had resulted in short levy of tax and interest.
06. In light of the above, it is evident that the assessment order passed on 30.12.2018 u/s 143(3) of the I.T. Act, 1961 is apparently considered erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the I.T. Act, 1961.”
8. It was submitted that as apparent from the show-cause notice, the Ld. Pr. CIT(Central) has held that since the returned income included the amount surrendered during the course of survey, the deeming provisions are applicable and the income tax payable has to be computed in terms of Section 115BBE of the Act. Further our reference was drawn to the para 2 of the impugned order wherein it has been stated by the Ld. Pr. CIT(Central) that the entire assessed income of Rs. 1,99,81,908/- included surrendered income of Rs. 2,02,00,000/- and during the course of assessment proceedings, the assessee has claimed that the surrendered income is nothing but unaccounted/unexplained stock in trade and unaccounted/unexplained receivables when the AO specifically asked why the provisions of Section 115BBE may not be invoked in its case. It was accordingly submitted by the Ld. AR that during the course of assessment proceedings, it is a matter of record that as far as the applicability of Section 115BBE is concerned, the matter has been duly examined by the AO. Further referring to the findings of the Ld. Pr. CIT(Central) wherein he has stated that the AO accepted the income of the assessee without verifying and examining the same and has taxed entire assessed income at normal rate, it was submitted that the said findings is also factually incorrect and in this regard, our reference was drawn to the show cause notice issued by the AO during the course of assessment proceedings and the contents thereon reads as under:
“Please refer to the proceedings pending in the case for the A.Y. 2017-18 as a consequence of survey conducted u/s 133A at your business premises i.e. M/s Shankar Agro Foods which has been taken over subsequently by M/s Bindas Foods Pvt. Ltd. During the course of those proceedings, stock inventory was prepared physically and compared with the books of account. Alongwith it was observed that in addition to the difference in the stock, there were certain loose documents / accounts in respect of certain parties representing the amounts receivables. All these issues were duly confronted to Sh. Kewal Krishan as per the statement recorded on 31.08.2016. Keeping in view the discrepancies in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below:
