Deeming provision u/s 69 not applicable on unrecorded transaction as nature and source explained

Baljinder Kumar Vs DCIT (ITAT Chandigarh)

ITAT Chandigarh held that transactions which were not recorded at the time of survey are unrecorded transaction, however, as nature and source of such unrecorded transaction explained the same cannot be brought to tax under the deeming provisions of section 69 of the Income Tax Act.

Facts- A survey action u/s. 133A took place on 05/09/2018 at the business premises of the assessee who is Proprietor of M/s Shivam Coir Foam Products wherein the assessee surrendered a sum of Rs. 15,00,000/- on account of receivables / debtors. Subsequently, the assessee filed his return of income u/s. 139(4) on 12/01/2020 at the returned income of Rs. 21,33,420/- including the amount surrendered of Rs. 15,00,000/-. The case of the assessee was thereafter selected for scrutiny and notice u/s. 143(2) and 142(1) were issued. During the course of assessment proceedings, the assessee was also asked a specific query regarding the amount surrendered during the course of survey and as to how the assessee has done the treatment of the amount surrendered in the books of account as well as to furnish details of the tax payment and to show cause why the amount so surrendered should not be taxed u/s. 115BBE of the Act.

However, AO held that the amount of Rs. 15,00,000/-is to be assessed under section 69 and not under the head business income and the same was accordingly brought to tax as per the provisions of Section 115BBE of the Act. CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- No doubts, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the as-sessee has provided the necessary explanation about the nature and source of such unrecorded trans-actions, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69 of the Act. Accordingly, held that the income of Rs 15,00,000/- surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 of the Act and the same has been rightly offered to tax under the head “business income” and as a necessary corollary, in absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration.

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