Case Law Details
Jaspreet Singh Mauj Vs DCIT/ACIT (ITAT Chandigarh)
The case of Jaspreet Singh Mauj Vs. DCIT/ACIT brings to light the intricacies and interpretations of Section 69 of the Income Tax Act, 1961. This landmark verdict by ITAT Chandigarh becomes a critical reference for income surrendered from unexplained sources, especially when no concrete evidence is found during survey operations.
Background: Dr. Jaspreet Singh Mauj, a practicing Veterinary Doctor, reported his earnings from his profession. Upon a survey conducted at his premises, no incriminating documents or any form of cash were uncovered. Despite the lack of concrete evidence, Dr. Mauj voluntarily surrendered an amount of Rs. 30 lacs, a move to potentially cover building expenses and other unreported incomes.
Assessment and Contention:
- Initial Assessment:
- The Assessing Officer (AO) interpreted the voluntary surrender of Rs. 30 lacs as an unexplained income under Section 69.
- The AO further levied a tax of 60% under Section 115BBE and made an additional charge of Rs. 2,11,600 due to an increase in the value of the building.
- CIT(A) Verdict:
- The Commissioner of Income Tax (Appeals) upheld the AO’s assessment, reinforcing the contention against Dr. Mauj.
Key Points from the ITAT Chandigarh’s Ruling:
- Absence of Concrete Evidence: The tribunal emphasized that no incriminating evidence or cash was found during the survey. The surrendered amount was based on an estimated possibility that not all professional receipts were accounted for.
- Central Board of Direct Taxes’ Instructions: ITAT pointed out that the board has previously advised against relying solely on surrender or confession statements. Instead, the focus should be on gathering evidence relevant to unexplained incomes.
- Assessee’s Voluntary Surrender: Dr. Mauj had paid due taxes at 30% + surcharge on the voluntarily surrendered amount, emphasizing his intention to remain compliant and transparent.
- Invocation of Section 115BBE: The tribunal concluded that the invocation of this section was inapplicable in this particular scenario.
- Unjustified Additional Charge: The added amount of Rs. 2,11,600 due to the building’s increased value was deemed unjustified, given Dr. Mauj’s clear statement of surrendering the extra professional income that also covered the building expenses.
Conclusion: The ITAT Chandigarh’s ruling in favor of Dr. Jaspreet Singh Mauj reiterates the importance of evidence-based assessments and reinforces the notion that voluntary surrenders should not be misconstrued without concrete proofs. This verdict serves as a precedent, emphasizing the importance of fair judgment and the role of authentic evidentiary support in tax-related matters.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been preferred by the assessee against the order dated 04.11.2022 of the Commissioner of Income Tax (Appeals)-5, Ludhiana [in short ‘CIT(A)’] pertaining to 2018-19 assessment year.
2. The assessee in this appeal has raised the following grounds of appeal:
1. That the Worthy Commissioner of Income Tax(Appeals) – V, has erred in upholding the contention of the Assessing Officer by treating the Surrendered Business Income of Rs.3 0,00,000 under the head Building as Deemed Income u/s 69 of the Income Tax Act, 1961.
2. That the Worthy Commissioner of Income Tax (Appeals) – V, has erred in upholding the contention of Assessing Officer by1 not allowing depreciation claim on the said Building.
3. That the Worthy Commissioner of Income Tax (Appeals) – V, has erred in upholding an addition of Rs.2,11,600 on account of addition in the value of Building based on the valuation report of the Department valuer.
4. That the Worthy Commissioner of Income Tax (Appeals) – V, has erred in upholding the action of the Assessing Officer by treating the Business Income surrendered Rs.30,00,000 chargeable to tax under Section 115BBE @60 percent instead of Normal Tax Rate.
5. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
3. The brief facts of the case are that the assessee is a Veterinary Doctor and has been returning his income from profession. A survey action was carried out at the premises of the assessee but neither incriminating documents nor any cash etc. was found during the survey action. However, the Survey Party enquired from the assessee about the expenditure incurred on the building. In response, the assessee surrendered an amount of Rs.30 lacs to cover the building expenses and other unaccounted income.
4. During the assessment proceedings, the Assessing Officer ( in short ‘the AO ‘) treated the aforesaid surrendered amount of Rs. 30 lacs as unexplained income of the assessee and assessed the same u/s 69 of the Income Tax Act, 1961 (in short ‘the Act’). Further, the AO invoked the provisions of Section 115BBE of the Act and taxed the said income @ 60%. The AO also separately added an amount of Rs.2,11,600/- on account of addition in the value of building.
5. The ld. CIT(A) confirmed the addition so made by the AO.
6. Before us, the ld. Counsel for the assessee has submitted that the assessee did not have any other income, except from the practice of profession as a Veterinary Doctor. He has further relied upon the surrender letter dated 05.10.2017, the contents of which are reproduced as under :
To
The Additional Commissioner of Income Tax,
Range-6, Ludhiana.
Sub : Survey at the premises of Dr. Jaspreet Singh (under Section. 133A). Dear Sir,
It is submitted that I am veterinary Doctor doing private practice. My premises at Sarabha Nagar and Passi Chowk, Sua Road were surveyed by Income Tax deptt. On 4/10/2017.
I am a good Doctor but I am bad in maintenance of records and books of account. I receive my fees and sale proceeds in cash.
The possibility of these business/professional receipts remaining untaxed cannot be ruled out. The building at passi chowk, sua road, has been build from business/professional receipts only as I have no other source of income. There is non-maintenance/improper maintenance of books/records.
I am law abiding & peace loving citizen and do not want to enter into litigation with the deptt. And wish to cover all kind of discrepancies. I now surrender under the head business and profession a sum of Rs. Thirty Lakhs (30,00,000) to cover building and other discrepancies.
I shall deposit Income tax @ Rs.30% + Surcharge on this surrendered amount ( i.e. Rs.9,27,000/-). I shall include this income in my current year in addition to my normal professional/business income.
This surrender is being made voluntarily without any coercion and subject to no penalty under the Income Tax Act.
Please accept this surrender.
Thanking you,
Yours faithfully
(Dr. Jaspreet Singh)
Vets for Pets 10-1
Sarabha Nagar, Ludhiana.”
7. The ld. Counsel for the assessee has submitted that a perusal of the aforesaid surrender letter would reveal that firstly there was neither any cash nor any incriminating material was found during the survey action. However, a surrender was obtained by the department stating therein that there might be professional receipts which might not be included in the income returned by the assessee and therefore, to cover up the expenditure incurred on the building and other professional income, the assessee surrendered Rs.30 lacs as his undisclosed professional income. The assessee also paid due taxes, thereupon @ 30% + surcharge etc. There is nothing on record that the assessee had received any other unexplained income. The aforesaid surrender has been made just on estimation basis that the assessee might have received from professional receipts which might not have been accounted for. The Central Board of Direct Taxes has also issued instructions that the Income Tax Authorities at the time of survey/search action should not harp upon taking surrender/confession statements, rather they should collect the evidences relevant to unaccounted/unexplained income and that the additions should not be based merely on by obtaining surrender statements. However, in this case, the surrender statement has been obtained and there is no evidence nor any allegation of the Survey Party that the assessee had income from any other source. In fact, no such income has been found during the survey action. However, the assessee to keep his promise, has offered for taxation the surrendered additional professional income of Rs.30 lacs. Under the circumstances, the action of the AO in assessing the aforesaid surrendered income as income from unexplained sources u/s 69 of the Act cannot be held to be justified. Therefore, the said surrendered income has been rightly offered by the assessee his business/professional income.
8. In view of the above discussion, the invocation of Section 115BBE of the Act is also held not applicable in this case. Further, the addition made by the AO of Rs.2,11,600/- on account of addition in the value of building cannot also be held to be justified as the assessee in clear terms has surrendered the additional professional income covering the expenditure incurred on building also. In view of this, the addition made by the AO cannot be held to be justified and the same is, accordingly, set aside.
9. In the result, appeal of the assessee is treated as allowed.
Order pronounced in the Open Court on 21st July, 2023.
