Gandhi Ram Vs PCIT (ITAT Chandigarh)
Held that deeming provisions of section 115BBE doesn’t apply as source of income clearly explained and established by the assessee
Facts-
PCIT examined the assessment records of the assessee and held the assessment order as erroneous as well as prejudicial to the interest of the Revenue and the same has been set aside to the file of the AO for passing a fresh order after giving sufficient opportunity to the assessee. Against the said order and findings, the assessee is in appeal before Tribunal.
Notably, PCIT hold that income so surrendered during the course of survey is covered as per the provisions of section 68, 69, 69A, 69B, 69C and 69D and the income referred is chargeable to tax at the rate prescribed u/s. 115BBE.
Conclusion-
Held that merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked.
We therefore find that the Assessing officer has duly taken cognizance of statement of the assessee recorded during the course of survey, the surrender letter and the return of income, and after examination thereof and due application of mind has not drawn any adverse inference and income has been rightly assessed under the head “business income”. In light of the same, we are of the considered view that the order so passed by the Assessing officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer after due appreciation of facts and circumstances of the case, assessed the income under the head “business income” and didn’t invoke the deeming provisions as so suggested by the ld PCIT.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee against the order of Learned Principal Commissioner of Income Tax, Pat iala [in short the ‘Ld. PCIT] passed u/s 263(1) of the Income Tax Act, 1961 (in short ‘the Act’) dated 28.03.2021 wherein assessee has raised the following grounds of appeal :-
1. “On the facts and circumstances of the case and in law, the PCIT, Patiala has erred in initiating proceedings u/s 263 of the Income Tax Act, 1961 by wrongly assuming jurisdiction u/s 263 and hence, the order passed by the ld. PCIT u/s 263 of the Income Tax Act, 1961 is bad in law and void authorities below-initio.
2. Without prejudice to ground no. 1 above, on the facts and circumstances of the case and in law, the ld. PCIT Patiala has erred in assuming jurisdiction and passing the revisionary order u/s 263 of the Income Tax Act, 1961 in spite of the fact that the ld AO has made adequate inquiries and verification of documents, books of accounts were also sought from the assessee during the course of assessment proceedings and AO has taken one permissible view. The order passed by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the order of PCIT Patiala should be set aside.
3. The survey was conducted by the Income Tax Department on 21.09.2016 and the income was surrendered under the head Business Income and the relevant advance tax cheques were also taken by the AO to be deposited against the advance tax. Section 115BBE vide the Taxation Laws (Second Amendment) Act, 2016 (No. 48 of 2016) was passed by the Hon’ble Lok Sabha of India on 29.11.2016. The Second Amendment Act, 2016 received the assent of the President on the 15th December, 2016 and is published for general information. The survey was conducted and income was surrendered much before the date of amendment, hence the cognizance of PCIT Patiala is not tenable in the eyes of law.”
2. Briefly the facts of the case are that the assessee has filed his return of income declaring total income of Rs. 1,08,53,110/- on 07.11.2017 which was selected for scrutiny and thereafter the assessment was completed at an assessed income of Rs. 1,09,03,261/-. Thereafter, the assessment records were called for and examined by the ld. PCIT and a show cause notice under section 263 dated 08.11.2019 was issued to the assessee. Thereafter, after considering the submissions so filed by the assessee, the ld. PCIT has held the assessment order as erroneous as well as prejudicial to the interest of the Revenue and the same has been set aside to the file of the AO for passing a fresh order after giving sufficient opportunity to the assessee. Against the said order and findings of the ld PCIT, the assessee is in appeal before us.
3. During the course of hearing, the ld. A/R has submitted that the ld. PCIT has erred in holding that the AO has passed the assessment order without making requisite enquiry. In this regard our reference was drawn to the assessment order so passed by the AO where at para 3 of the order, he has taken due cognizance of the income offered by the assessee in the return of income which includes the surrendered income of Rs. 1,02,00,000/- surrendered during the course of survey. It was submitted that the matter has been duly examined by the AO and the returned income has been accepted wherein the amount surrendered has been offered as part of the business income and due taxes have been paid thereon. It was further submitted that the ld. PCIT has erred in holding that the income so surrendered during the course of survey is covered as per the provisions of section 68, 69, 69A, 69B, 69C and 69D read with section 11 5BBE of the Act. It was submitted that the assessee is carrying on the business for past many years and the return of income has been filed on the basis of audited books of account and there has been no dispute with regard to the mode and manner of earning the income which is none other than the income derived from the activity of carrying on the business. It was submitted that during the course of survey, the assessee was found to be carrying on the same business as per the regular books of account and no other activity other than the activity as per books of account have been noticed and, therefore, the amount which have been offered during the survey is on account of income derived from the same business activity as noticed during the course of survey. It was accordingly submitted that there cannot be any dispute that the nature of income so offered is in the nature of business income and which cannot be brought to tax under the aforesaid deeming provision read with section 11 5BBE of the Act. It was submitted that it is a settled law that the burden is on the Department to prove that the income so derived has to be assessed under the deeming provision. However, there is no iota of evidence with the Department to prove the same. It was submitted that by ignoring the documentary evidence found during the course of survey that the assessee was only engaged in the business as per regular books of account, the ld. PCIT has given a finding that the deeming provisions are applicable in the case of the assessee. It was further submitted that the letter filed during the course of survey states “The above said surrender is made over and above my regular income for the current year” and the facts as mentioned therein have not been disputed so far and letter filed by the assessee has been accepted and taxes were paid to Income Tax Officer through advance cheques mentioned in the surrender letter on 21.10.2016 have been accepted, thus, there is no dispute. Even the surrender of Income was declared under the head business Income and the same has been accepted. The amendment was inserted by Finance Act, 2016 on 21.11.2016 w.e.f. 01.04.2017 which is again after the date of survey. Hence now, no dispute can be raised without any evidence since no new facts have emerged.
4. As regards to the fact as to why the provisions of section 115BE of the Act are not applicable to the facts of the assessee, in this regard, it is submitted that Section 115BBE are applicable only where the income can be classified under the provisions of the section 68 to 69C of the Act. However, in this case, the findings of the survey team, impounded documents/records, statements of the Proprietor recorded by the survey team during the survey and even post survey, clearly point out to the fact that during the course of the survey proceedings, the nature of surrendered income of the assessee firm was duly probed by the department officials and based on the evidence on record and statement of the Proprietor, such income has been duly accepted as the business income of the assessee firm over and above the regular business income.
5. It was submitted that it is not a case where unexplained credits, assets, investment or expenditure has been found to have been made by the assessee firm by the survey party. As such there remains no question of any income to be adjudicated under section 68 to 69C of the Income Tax Act in case of the assessee, as the nature and source of the income surrendered by the assessee clearly stands explained. Where the nature and source of the income offered by the assessee firm clearly stands explained, no addition can be made under section 68 to 69C of the Act and the provisions of section 115BBE cannot be invoked. Further reliance has been placed on various Hon’ble High Court and Coordinate Benches decisions.
6. Per Contra, the ld. CIT D/R has vehemently argued the matter and submitted that the onus is on the assessee to explain the source of income so surrendered and further, even the AO has failed to enquire about the source of income so surrendered and has accepted the returned income as so filed by the assessee. Further, the ld CIT/DR relied on the findings of the ld. PCIT and our reference was drawn to the relevant findings which read as under:-
“ (x) In the case of the assessee, survey u/s 133A was conducted on 21.10.2016 i.e. relevant assessment year 2017-18. The following discrepancies were found, confronted and accepted by the assessee during the course of survey proceedings.
