Surrendered income from a survey is business income if the source is explained.

Issue

When a taxpayer, during a survey, surrenders undisclosed assets (like excess stock, cash, and investments) and declares them as their business income, can the Assessing Officer (AO) reject this explanation without contrary evidence and reclassify the amount under the deeming provisions of Sections 69, 69A, or 69B to apply the higher tax rate of Section 115BBE?

Facts

A survey was conducted on an assessee engaged in the cloth trade. The survey revealed several unrecorded items: excess cash, excess stock, cash given to debtors, and an investment in a shop.
The assessee surrendered the entire amount and, in their statement, specifically declared that the source of this income was their business. They duly included this surrendered amount in their tax return as business income and paid tax at the normal applicable rates.
The Assessing Officer (AO), however, was not satisfied. Without providing any evidence to rebut the assessee’s explanation, the AO reclassified the surrendered amount:
- Excess cash was treated as unexplained under Section 69A.
- The investment in the shop and cash to debtors were treated as unexplained under Section 69.
- Excess stock was treated as unexplained under Section 69B.
Consequently, the AO applied the higher, punitive tax rate under Section 115BBE to the entire amount. The assessee had provided a list of the debtors, who were their regular customers, to prove the business nexus.

Decision

The court ruled in favour of the assessee.

It held that since the assessee had provided a consistent and plausible explanation—that the source of all the undisclosed assets was their business income—and the tax department had failed to bring any evidence on record to rebut this claim, the income must be classified as business income.
The court noted that the assessee’s statement during the survey, where they declared the source as business income, was a crucial piece of evidence that was never disproved by the AO.
Therefore, the income was correctly offered by the assessee as business income under Section 28(i) and could not be re-characterized under the deeming provisions of Sections 69, 69A, or 69B.

Key Takeways

Deeming Provisions Apply Only When the Source is Unexplained: Sections 69, 69A, and 69B are deeming provisions that are designed to be used only when the taxpayer offers no explanation, or the explanation offered is not satisfactory, regarding the nature and source of an asset or investment. They cannot be used when a plausible source (like the business itself) has been provided and not disproved.
The Onus Shifts to the AO: Once a taxpayer surrenders an amount and explains its source (e.g., “this is my undisclosed business income”), the onus shifts to the Assessing Officer. If the AO wants to reject this explanation and treat the amount as coming from some other, unexplained source, they must provide some evidence or reasoning to support their conclusion.
A Statement During a Survey is Key Evidence: A statement that is recorded from the taxpayer during a survey, in which they explain the source of the surrendered income, is a very important piece of evidence. If the department does not challenge or rebut the contents of that statement with contrary proof, it is generally accepted by the courts.
Classification is Crucial for the Tax Rate: The correct classification of the income is critical because it determines the applicable tax rate. If the income is classified as “business income,” it is taxed at the normal slab or corporate rates. If it is reclassified under the deeming provisions, the much higher and punitive tax rate under Section 115BBE is applied.

IN THE ITAT JAIPUR BENCH ‘B’

Hiralal Vijawat

ACIT/DCIT

Dr. S. Seethalakshmi, Judicial Member
and RATHOD KAMLESH JAYANTBHAi, Accountant Member

IT APPEALNo. 614 (JP) OF 2025
[Assessment year 2019-20]

AUGUST 21, 2025

Mahendra Gargieya, Adv. (VC) for the Appellant. Gaurav Awasthi, JCIT, SR. DR for the Respondent.

ORDER

Rathod Kamlesh Jayantbhai, Accountant Member.- The present appeal is because the assessee dissatisfied with the finding so recorded in the order of the learned Commissioner of Income Tax (Appeals), Udaipur-2 dated 31/03/2025 [here in after CIT(A)] for assessment year 2019-20. The said order of the ld. CIT(A) arises as against the order dated 30.09.2021 passed under section 143(3) of the Income Tax Act, 1961 [for short Act] by ACIT, Central Circle, Kota [for short AO].

2. The impugned order is challenged by the assessee on the following grounds:

The impugned order dated 30.09.2021 u/s 143(3) of the Act is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence, the same kindly be quashed.

Rs. 70,00,003/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the invocation of provision the of S. 115BBE of the Act considering the additional income admitted during course of survey as unexplained income u/s 69C of the Act and wrongly assessing the same under the head Income from Other Sources, as against legally correct head being Income from Business and Profession by the ld. AO. The consideration of declared additional income as Income from Other Sources so done under the legally wrong head and levy of tax u/s S. 115BBE of the Act being completely contrary to provisions of law and facts, such income be declared as Business Income and invoking of S.115BBE be quashed.

The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the imposition of tax, surcharge, cess etc. as per provision of S. 115BBE of the Act by the ld. AO. The invoking of S. 115BBE is contrary to the provisions of law, on facts and without jurisdiction. The appellant totally denies its liability. The tax liability so created, kindly be deleted in full.

The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234B, 234C and 234D of the Act. The appellant totally denies its liability of charging of any such interest. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full.

The appellant prays your honor to add, amend or alter any of the grounds of the appeal on or before the date of hearing.

3. Succinctly, the fact as culled out from the records is that assessee is an individual and derives income from wholesale and retail sale of cloth, saries etc. The assessee had filed his ITR u/s 139 for the A.Y. 2019-20 on 24.09.2019 declaring total income of Rs. 75,87,380/-. A survey action u/s 133A in the case of the assessee on 16.01.2019 done by the revenue. On account of the survey the case of the assessee was manually selected for compulsory scrutiny as per guidelines issued by the CBDT, New Delhi’s F.No. 225/126/2020/ITA-II dated 17/09/2020.

Consequent there upon notice u/s 143(2) was issued to the assessee on 23/09/2020 and served to assessee through ITBA Portal. In response to the notices so issued, the assessee filed submissions which were examined by the ld. AO.

Record reveals that in the survey action u/s 133A of the Act, conducted on 16/01/2019, physical verification of stock and cash were taken and inventoried by the survey team. While doing so it was noticed that the same were not matched with the regular books of accounts of the assessee. Some incriminating documents were also found during the survey proceedings. On perusal of these incriminating documents, it was noticed that various transactions related to cash payment given to debtors and investments made in construction of shop were not recorded in the regular books of accounts of the assessee. Therefore, assessee was asked to submit his explanation in this regard. The assessee in his statement recorded during survey proceedings admitted that he was unable to submit any explanation regarding transactions/discrepancies and offered total undisclosed income of Rs. 70,00,003/- under the various head for the A.Y 2019-20 as detailed herein below:-

1. Unaccounted cash	Rs. 8,50,003/-
2. Unaccounted excess Stock	Rs. 32,00,000/-
3. Unaccounted cash given to debtors	Rs.15,50,000/-
4. Unaccounted investment in	Rs.14,00,000/-
Construction of shop
Total	Rs. 70,00,003/-

The assessee had included this offered income of Rs. 70,00,003/- while filling his return of income filed for the relevant year and paid tax at normal rate thereon.

Whereas ld. AO noted that as the unaccounted/unexplained cash payment to debtors, investment made in construction of shop, excess cash and excess stock are covered u/s 69, 69A and 69B respectively, therefore tax should be charged as per the provision of section 115BBE of Act. Therefore, a show cause notice was issued to the assessee on 15.09.2021 asking that as to why the tax on the income offered for taxation during survey proceedings should not be charged as per provision of section 115BBE of Act. The assessee submitted his reply on 17.09.2021. In his reply, the assessee has stated that;

“The Assessee has disclosed Rs. 32,00,000/- in business income and Rs. 39,00,000/- as income from other sources. In our opinion this is the routine procedure of the business to consider GP rate on estimated basis on the basis of facts for not to possible maintained quantity wise stock, however at the time of physical valuation of stock, it may be how much right or wrong calculation but just for mental satisfaction we have considered excess stock as current year business income. On the other hand during the course of survey, it was part of mutual understanding that it will we consider as current year normal income so we have not kept any objection and signed the statement without keeping any attention on the records whether it belongs to me or false etc. We request to your good self to consider the facts and honesty of the Assessee to declared all the income (as surrendered in the statement) as part of current year income and paid the tax. There are no where any option to consider the income to be taxed as section 155BBE/ section 69/69A/69B of the IT Act.”

The reply of the assessee was considered by the ld. AO having considered that the offered income is part of his regular business income which was fully disclosed in books of accounts. But, the assessee has not submitted any documentary evidence to sustain his claim that the offered income was earned from business activities. Further, the assessee had himself admitted in his statement recorded during the survey proceedings that he was unable to submit details / explanation regarding the source of excess stock, excess cash, cash payments to debtors and investment made in construction of shop and offered total undisclosed income of Rs. 70,00,003/- for the F.Y. 2018-19. Further, during the assessment proceedings, the assessee has claimed that this offered income is in relation to business activities and there is direct nexus with business but the assessee has failed to provide any details and documentary evidences to sustain his claim. In absence of the any reliable documentary evidences, the reply of the assessee is not acceptable. The unaccounted/ unexplained cash payment to debtors and investment made in construction of shop are covered u/s 69. Similarly, unexplained excess cash and stock is covered u/s 69A & 698 of the Act. Considering the facts of the case, the reply submitted by the assessee is not found satisfactory by the ld. AO. Therefore, the unaccounted cash given to debtors of Rs. 15,50,000/- and unexplained investment in construction of shop of Rs. 14,00,000/- were considered as unexplained investment as per provision of section 69 of the Act. Similarly, unexplained excess cash of Rs. 8,50,003/-and unaccounted excess stock of Rs. 32,00,000/- are considered as unexplained money and Amount of investments, etc., not fully disclosed in books of account as per provision of section 69A and 69B of the Act respectively and accordingly charged to tax as per provision of section 115BBE of the Act.

4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

4.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under-

The AO noted that a survey action u/s 133A in the case of the assessee was conducted on 16.01.2019. The case of the assessee was manually selected for compulsory scrutiny as per guidelines issued by the CBDT, New Delhi’s F.No. 225/126/2020/ITA-II dated 17/09/2020. Notice u/s 143(2) was issued to the assessee on 23/09/2020 and served to assessee through ITBA Portal. Thereafter, due to centralization of case u/s 127, the case was transferred to this office.

The appellant claimed that during the assessment proceedings, the jurisdiction was transferred to DCIT Circle -II Kota vide order u/s 127.

The claim of the appellant is considered but not found to be acceptable. The appellant has not furnished any such order u/s 127 where jurisdiction is transferred to DCIT Circle II Kota. The transfer from ITO Ward Jhalawar to DCIT Circle – II Kota must have been on the basis of returned income of the assessee. The DCIT, Central Circle Kota has recorded that due to centralization of case u/s 127, the case was transferred to this office. Hence, the claim of the appellant that the order u/s 127 was for transfer of his case to DCIT Circle II Kota is found to be not supported by evidence and hence rejected.

Without prejudice to the above, this appeal is not against the order passed u/s 127 therefore the contention of the assessee is not found to be acceptable for consideration. The search and survey cases are centralized with the officers of Central Charges. This is administrative act and not subject matter of appeal under consideration. Therefore, the arguments of the appellant in this regard are not found to be acceptable.

This ground of appeal is treated as dismissed.

5.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted that as per incriminating documents found during survey transactions related to cash payment given to debtors, investments made in construction of shop were not recorded in the regular books of accounts of the assessee.

The assessee in his statement recorded during survey proceedings had admitted that he was unable to submit any explanation regarding these transactions/discrepancies and offered total undisclosed income of Rs. 70,00,003/- under the various head for the A.Y 2019-20. The details of the same are as under:

1.	Unaccounted cash	Rs.8,50,003/-
2.	Unaccounted excess stock	Rs.32,00,000/-
3.	Unaccounted cash given to debtors	Rs.15,50,000/-
4.	Unaccounted investment in Construction of shop	Rs.14,00,000/-
Total		Rs.70,00,003/-

The assessee had included this offered income of Rs. 70,00,003/- in his total income under the head “Income from Business or Profession” and “Income from other sources” in ITR filed for the relevant year and paid tax at normal rate thereon.

The Assessee has disclosed Rs. 32,00,000/- in business income and Rs. 39,00,000/- as income from other sources. In our opinion this is the routine procedure of the business to consider GP rate on estimated basis on the basis of facts for not to possible maintained quantity wise stock, however at the time of physical valuation of stock, it may be how much right or wrong calculation but just for mental satisfaction we have considered excess stock as current year business income.

The AO noted that the assessee had himself admitted in his statement recorded during the survey proceedings that he was unable to submit details/explanation regarding the source of excess stock, excess cash, cash payments to debtors and investment made in construction of shop and offered total undisclosed income of Rs. 70,00,003/- for the F.Y. 2018-19.

Further, during the assessment proceedings, the assessee has claimed that this offered income is in relation to business activities and there is direct nexus with business but the assessee has failed to provide any details and documentary evidences to sustain his claim. In absence of the any reliable documentary evidences, the reply of the assessee is not acceptable.

Therefore, the unaccounted cash given to debtors of Rs. 15,50,000/- and unexplained investment in construction of shop of Rs. 14,00,000/- are considered as unexplained investment as per provision of section 69 of the I.T. Act. Similarly, unexplained excess cash of Rs, 8,50,003/- and unaccounted excess stock of Rs. 32,00,000/- are considered as unexplained money and Amount of investments, etc. not fully disclosed in books of account as per provision of section 69A and 698 of the IT Act respectively. Therefore, tax is charged on these offered incomes as per provision of section 115BBE of the I.T. Act, 1961.

The appellant argued that for triggering S. 115BBE what is relevant is whether income remains disclosed or undisclosed or explained or unexplained. If the income is disclosed or explained as mandated by the law, then same would be taxable in the ordinary manner. On the other hand, if the income is undisclosed or unexplained then the provisions of section 115BBE may be triggered depending upon the facts involved in each of the cases

It is stated that the assessee accounted for such income alito in regularly maintained books of account and also declared the resultant income in its ROI. Consequently, it cannot be said that there was some excess shortage/undisclosed/unaccounted income, etc

The arguments of the appellant are considered but not found to be acceptable. The income is admitted as undisclosed income during the survey by the assessee and even after survey nature and source of such income which was admitted during survey is not explained. Even after this amount is included in books of account and also declared the resultant income in its ROI the nature and source of such amount remain undisclosed. Only because this is included in Return of Income it will not become business income unless the nature and source is explained. Hence, the arguments of the appellant that this is earned from business are not found to be acceptable without there being any supporting evidence brought on record. The appellant has not explained from which person the income is received. How much was the unaccounted sale made by the assessee to earn this much of Income? What was the source of expenditure which was made to effect the sales? The assessee has not explained that to whom the sale was made for generating such income. The assessee has not brought on record evidences which answer these questions. Hence, the claim that the income was from business is not found to be acceptable.

The admitted (and undisputed facts) are that the only source of income of the appellant is the income from business of wholesale and retail trading of clothes by the proprietor Shirt Hiralal Vijawat in reply to answer to Q9. 12. 13 and 15 and as admitted by the Ld. AO himself at Pr. 1 on Pg. 1 that the appellant firm is engaged in wholesale and retail trading of clothes The assessee was in receipt of the profit on the purchase and sale of fabrics noms. There is no other known or unknown source of income, neither stated by the assessee nor by the department.

It is stated that the alleged undisclosed income of Rs 70.00.003, are arising/resulting from the regular business income only le. from trading business and has to be classified w’s 14 rwis 28 as business income only and not income from other sources.

The claim of the appellant is that there cannot be any undisclosed income if the person is engaged in some business. The appellant is therefore arguing that the provisions of section 68, 69, 69A, 698, 69C and 69D are only applicable on the persons who are not engaged in any business activity. However, there is no such exception mentioned in these provisions of Income Tax Act. Therefore, the arguments of the appellant are found to be without any merit. The nature of income was clearly admitted as undisclosed income in the statement recorded during survey and the assessee has not furnished any evidence with regard to nature and source of such income which has been invested in the cash, amount given to debtors and amount invested in construction of shop. The appellant has not explained from which person the income is received. How much was the unaccounted sale made by the assessee to earn this much of Income? What was the source of expenditure which was made to effect the sales? The assessee has not brought on record evidences which answer these questions. Hence, the claim that the income was from business is not found to be acceptable. Hence, the deeming provisions are clearly applicable.

It is stated that disclosed was nothing but additional income only and it cannot be termed as excess/undisclosed/unaccounted income for the simple reason that survey was carried out on 16.01.2019 i.e before close of the relevant previous year ending on 31.03.2019

The appellant stated that the Id. AR of the assessee vide reply dated 16.09.2021 (uploaded on the Income tax portal on dt. 21.09.2021) has given a detailed breakup of additional income of Rs. 70 Lakh, however has unintended and inadvertently/ accidental used the word undisclosed instead of the word additional. This word undisclosed is only a typographically mistake and was used by mistake in a very causal/routine manner. Yet otherwise and importantly, as per the correct legal position and as per the facts of the case, these are not at all excess/shortage/ unaccounted/undisclosed income of the assessee but was only and simply an additional income.

The arguments of the appellant are considered but not found to be acceptable. The assessee admitted during the survey that the income was undisclosed income in the statement recorded during survey. The AR of the assessee vide reply dated 16.09.2021 has treated this income as undisclosed income. Also the assessee in the return of income has considered part of the income as income from other sources and not from business.

Without prejudice to the above, the assessee has not furnished any evidence with regard to nature and source of such income which has been invested in the cash, amount given to debtors and amount invested in construction of shop. The appellant has not explained from which person the income is received. How much was the unaccounted sale made by the assessee to earn this much of Income? What was the source of expenditure which was made to effect the sales? The assessee has not brought on record evidences which answer these questions. Hence, the claim that the income was from business is not found to be acceptable. Hence, the deeming provisions are clearly applicable.

The appellant stated that It has been held by the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala & Others 91 ITR 18 (SC):

“Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of accounts do not disclose the correct state of facts”.

The decision relied upon by the appellant is not found to be applicable on the facts of the assessee because the assessee has failed to show that the statement was incorrect even after survey because no evidence is brought on record to show that the income offered during survey was earned from business. The assessee has been given a proper opportunity to explain by the AO, however, the assessee could not explain nature and source of the income. Therefore, the reliance by the assessee on the decision of Hon’ble Supreme Court is not found to be acceptable.

It is stated that the profit arising from the fabric business, were advanced given to various debtors. There apart, additional cash found also arose from same business activity. There apart, additional income of Rs. 95 Laksh was account of income generated during the relevant years. The said table shows the utilization/availability of the funds under different headings of the asset/expenditure, etc. and their nature also suggest that the additional income was related to/arose during the course of the trading business only.

It is argued that the additional income was something other than the Income from business or that there was some other source of income giving rise to such alleged undisclosed income.

The assessee has not furnished any evidence with regard to nature and source of such income which has been invested in the cash, amount given to debtors and amount invested in construction of shop. The appellant has not explained from which person the income is received. How much was the unaccounted sale made by the assessee to eam this much of Income? What was the source of expenditure which was made to effect the sales? The assessee has not brought on record evidences which answer these questions. Hence, the claim that the income was from business is not found to be acceptable. Hence, the deeming provisions are clearly applicable. The onus is on the assessee to establish that the income is earned from business. In the failure of the assessee, the AO was justified in applying the deeming provisions of the Act.

It is argued that merely because the assessee has taken a mistaken view of the legal position by showing the income surrendered during the course of survey in a particular head of income numerated u/s 14 of the Act, is a highly technical task. Acquiescence cannot take away night a party to which he is otherwise entitled to. Therefore, even if the assessee has made some commitment, it cannot work as an estoppol and the assessee, if still feels aggrieved in any manner, can pursue legal remedy. Hence, showing income under a wrong head in the retum of income cannot be taken as an admission.

The arguments of the appellant are considered but not found to be acceptable. The assessee may not be technically sound in income tax but he knows his business. The assessee knows his business more than the CA. Hence, the assessee after considering the nature of his business made a statement during survey that the income is undisclosed income then the same is to be treated as undisclosed income of the assessee. Even in the return of income which is furnished after taking technical advice, part of the income is not offered as business income. The CA of the appellant also treated the income as undisclosed income in the reply furnished as admitted in the appellate proceedings also. Moreover, even after survey and during the assessment proceedings or in the appellate proceedings, the appellant failed to furnish evidences to establish that the income was earned from business activities. The nature and source of the income surrendered during the survey is not explained even after survey with documentary evidences. Hence, the claim made by the appellant is not found to be acceptable.

Issue with regard to various types of Income is discussed and decided as under:-

Excess Stock

The appellant has also relied upon the decisions of Hon’ble Jurisdictional Rajasthan High Court in the case of CIT of CIT vis Bajarang Traders D.B. I.T. No. 258/2017 dated 12/09/2017 to argue that there is no dispute about the existence of business nexus with said excess stock, at most it could have constitutes “business profits and not the deemed Income u/s 69 of the Act.

I have considered fact of the case. The assessee has relied upon decision of Hon’ble High Court of Rajasthan in the case of Pr. CIT, Alwar v. Bajarang Traders [D.B Appeal No. 258/2017 dated 12.09.2017) wherein the Hon’ble High Court has confirmed the view of the Tribunal which is reproduced as under:-

“Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head “business income” or “income from other sources” In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head “business income” and not under the head income from other sources”

Applying the proposition of law laid down in the judicial pronouncements as discussed above, the surrender made on account of excess stock has to be brought to tax under the head “business income”. Accordingly, the addition u/s 69A/69B is not found to be justified. Therefore, section 115BBE of the Act, 1961 is not found to be applicable. The amount of excess stock is to be added as business income of the assessee. The addition made by the AO is confirmed but as business income of the assessee.

Excess Cash

With regard to excess cash, the assessee has relied upon the decision of ITAT Jodhpur in the case of Lovish Singhal & ORS.vs. ITO & ORS (2018) 53 CCH 0250 (Jodhpur) (Trib) (PB60-69). In this case it was held that in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income.

The facts of the case are considered. In the present case, the assessee has not explained that the excess cash found was earned out of sale of goods in which the assessee was dealing. No such evidence is brought on record. The assessee during the survey stated in reply to Q. No. 9 that this surrendered income of excess cash is not recorded in regular books of accounts. It is admitted that there is no clarification with regard to the excess cash. Therefore, the excess cash was admitted to be undisclosed income. This income was surrendered in addition to regular income of the assessee. The assessee has not explained nature and source of such amount in assessment or appellate proceedings by bringing some evidences. Therefore, the decision relied upon by the assessee is not found to be applicable on the facts of present case. Accordingly, the addition u/s 69A is found to be justified. Therefore, section 115BBE of the Act, 1961 is found to be applicable. The amount of excess cash is to be added as deemed income of the assessee as per provisions of section 69A of the Act. Therefore, the action of the AO treating the excess cash of Rs. 8,50,000/- as deemed income as per section 69A is found to be justified and confirmed.

Unexplained Loans and Investment in House

On perusal of statement recorded during the survey, the assessee stated in reply to Question no. 13 that the amount of Rs. 15,50,000/- on account of unexplained debtors and in reply to question no. 14 Rs 14,00,000/- on account of investment in construction of shop is surrendered in addition to the regular income of the assessee. It was accepted that this amount of investment was not recorded in the regular books of accounts. Neither any evidence was furnished during the assessment or appellate proceedings that the income was earned out of regular business of the assessee.

The excess stock of a commodity in which the assessee is dealing directly establishes the business link. However, it is not the case in unaccounted advances and investment in house. The assessee has to establish that the advances or investment in house were given out of income earned from the business activity to establish that income was earned from business. In the absence of cogent evidences brought on record, the claim is to be rejected. The decisions relied upon by the appellant are also on this line that if the assessee is able to explain the nature and source of the income eamed then the same is to be treated as business income. However, in the present case, the assessee failed to establish with evidences that the nature and source of the advances and investment in house was from business activity.

The argument of the assessee that the AO has not brought any evidence to prove that the assessee earned income other than the business of assessee is not found to be acceptable because of two reasons. Firstly, the onus is on the person who is claiming. The assessee is relying on the decisions where nature and source of excess cash and advances is proved to be out of business. Then the onus is on the assessee to establish the claim. In the absence of proving the same, the AO was justified in treating these amounts as earned from undisclosed sources as Income from other sources and not from business. Secondly, the source of the investment in the advances is in exclusive knowledge of the assessee. The AO cannot be expected to prove which is in exclusive knowledge of the assessee.

In essence, the assessee is arguing that if the assessee is engaged in business activity, all unaccounted assets or income found during search and survey should be considered as earned from business activity. If the argument of the assessee are accepted then there will be no addition u/s 68, 69, 69A or 69C in case the assessee is engaged in some business activity. This is not found to be acceptable as per the provisions of Income Tax Act. There was no such intention of the legislature. There is no provision in the Income Tax which says that the sections of deemed income family are not applicable on the assessee who is engaged in the business activity. Hence, the arguments of the assessee are not found to be acceptable.

In view of clear failure on the part of the assessee to explain the nature and source of the advances made by the assessee, unaccounted investment in construction of shop the addition made by the AD of Rs. 15,50,000/- and Rs. 14,00,000/- respectively is found to be justified and upheld as per provisions of section 69 of the Income Tax Act.

Charging of Tax u/s 115BBE

The appellant has also raised the issue of charging tax u/s 115BBE of the Income Tax act. The section 115BBE is charging section. The argument of the appellant are considered. The Income Tax Act is a self contained code consists of both charging and machinery sections. Charging sections are those sections by which liability is created or fixed. Machinery sections are those sections which ensure quantification, imposition and collection of tax created by the ‘charging sections”. Thus ‘Machinery Provisions’ are basically subordinates to the charging section. On applying the above principles section 115BBE is categorized as ‘machinery provision’ which is subordinate to the charging sections 68 and section 69 family. There is a very practical rule in the interpretation of taxing Statutes that ‘charging provisions’ are interpreted strictly while the ‘machinery provisions’ are interpreted liberally.

The above criteria of interpretation of the ‘Statute’ is supported by several judicial precedents.

Some land mark judicial precedents are as under

(i)

J.K. Synthetics Ltd. v. CTO 370 (SC).

(ii)Gursahai

Saigal v. CIT [1963] 48 ITR 1(SC).

(iii)

India United Mills Ltd. v. CEPT [1955] 27 ITR 20 (SC).

(iv)

CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC).

The Hon’ble Supreme Court in the case of J.K. Synthetics Ltd. (supra) held as under:-

“It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters.

Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas [1940] 8 ITR 42 (PC), Indian United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay, [1995] 27 ITR 20 (SC)and Gursahai Saigal v. CIT, Punjab, [1963]Gursahai Saigal v. CIT [1963] 48 ITR 1(SC)/ 48 ITR 1 (SC).”

The Hon’ble Supreme Court in the case of Gursahai Saigal (supra) held as under:-

“Those sections which impose the charge or levy should be strictly construed; but those which deal merely with the machinery of assessment and collection should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable.”

The Hon’ble Supreme Court in the case of ‘India United Mills Ltd. (supra) applied the principles laid down by the Privy Council in the case of ‘Mahaliram Ramjidas (supra)’ held as under:

“Ordinarily, the charging section which fixes liability is strictly construed but the rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provision must, no doubt, be so construed as would effectuate the object and purpose of the Statute and not to defeat the same.”

In view of above discussion, when the addition is made in sections 68 and section 69 family. If the addition is made under these sections, the tax has to be charged as per provisions of section 115BBE. The charging of tax as per provisions of section 115BBE is automatic. Hence, no separate show cause notice is required for charging tax u/s 115BBE. Therefore, the argument of the appellant are not found to be acceptable.

The arguments of the appellant are against the expressed provisions of the Income Tax Act. Sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/698/69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income 115BBE (1) of the Act.

The issue raised by the appellant is therefore not found to be acceptable and rejected.

This ground of appeal is treated as partly allowed.

6.2 Charging of Interest under various sections of Income Tax Act is mandatory as held by Hon’ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala 252 ITR 1 (SC) and, therefore, the same has to be charged as per provisions of the Income Tax Act. The appellant has not explained as to why the interest as per provisions of Income Tax Act should not be charged. The AO shall charge the interest as per provisions of the IT Act while giving effect to this order on the income assessed after taking into consideration of this order.

7. The last Ground of Appeal is that the appellant prays your honor to add, amend or alter any of the grounds of the appeal on or before the date of hearing.

7.1 The appellant has not added, altered or modified any of the above mentioned grounds of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, no needing any specific adjudication and is accordingly treated as disposed off.

8. In the result, the appeal of the appellant is treated as partly allowed.

5. Aggrieved with the finding so recorded in the order of the ld. CIT(A), the assessee preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the assessee, ld. AR of the assessee, has filed the written submissions which reads as follows :

Brief General Facts: The admitted facts as stated by the AO are that the assessee engaged in the business of Wholesale and Retails Trading of Ladies and Gents Dresses items i.e. cloth, Sarees etc. under M/s Vijawat Vastra Laya at Bhawani Mandi. A survey u/s 133A was carried out on dated 16.01.2019 during the course of which statement of the assessee i.e. Shri Hiralal Vijawat were recorded u/s 133A/131 (PB 24-31) wherein he voluntarily admitted business income of Rs. 70,00,003/– in addition to regular income, which remained to be accounted for. Thereafter, the assessee-firm filed its Return of income u/s 139 (PB 1) on dt. 24.09.2019 declaring total income of Rs.75,87,380/-, which also included such additional income of Rs. 71,00,003/-(i.e. 70 Lakhs plus 1 Lakh additional as cash in hand). Thereafter, the case was selected for complete Scrutiny assessment.

The AO completed the impugned assessment u/s 143(3) vide order dated 30.09.2021, accepting the ROI filed by the assessee dt. 30.09.2021, without making any addition to the same. However, the AO imposed tax at special rates u/s 115BBE of the Act on the income of Rs. 70,00,003/-, holding as under:

“Considering the facts of the case, the reply submitted by the assessee is not found satisfactory. Therefore, the unaccounted cash given to debtors of Rs. 15,50,000/- and unexplained investment in construction of shop of Rs. 14,00,000/- are considered as unexplained investment as per provision of section 69 of the I.T. Act. Similarly, unexplained excess cash of Rs, 8,50,003/- and unaccounted excess stock of Rs. 32,00,000/- are considered as unexplained money and Amount of investments, etc., not fully disclosed in books of account as per provision of section 69A and 69B of the IT Act respectively. Therefore, tax is charged on these offered income as per provision of section 115BBE of the I.T. Act, 1961. Since, the assessed income includes income chargeable to tax as per provision of section 115BBE of the I.T. Act, 1961. Therefore, I am satisfied to initiate penalty proceeding u/s 271AAC of the I.T. Act, 1961.

Subject to the foregoing remarks, the total income of the assessee is computed as under: –

X X X

Assessed u/s 143(3) of the Income Tax Act on total income of Rs. 75,87,380/- (Income of Rs. 70,00,003/- is charged as per provision of section 115BBE of the IT Act). Interest is charged u/s 234B, 234C & 234D. Interest u/s 244A is also withdrawn, as per law. A copy of this order along with ITNS 150 which is part of this order is served upon assessee. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty u/s 271AAC of the Income Tax Act is initiated as assessed income includes income chargeable u/s 115BBE by way of issue of notice u/s 274 r.w.s 271AAC of the Act. Penalty notice u/s 274 r.w.s 271AAC of the Act is issued accordingly.”

The assessee filed appeal before ld. CIT(A) which was disposed off vide order dt. 31.03.2025 by granting part relief only upto Rs. 32 Lakhs held as Business Income.

Feeling aggrieved, the assessee filed this appeal.

Hence this appeal.

Submission:

G.O.A 1: The impugned order dated 30.09.2021 u/s 143(3) of the Act is bad in law and on facts:

I. Notice issued by Non-Jurisdictional AO:

1.1 The relevant facts are that that initially the jurisdictional AO of the Assessee was ITO Ward Jhalawar (PB 32-35), who had issued the jurisdictional notice u/s 143(2). However thereafter, during the assessment proceedings, the jurisdiction was transferred to DCIT Circle – II Kota vide order u/s 127, who again issued jurisdictional notice u/s 143(2) (PB 36-39). Strangely, the impugned assessment order was passed by another officer being DCIT Central Circle Kota i.e. non jurisdictional AO, instead of the DCIT Circle II Kota.

2. Hence, even considering the order u/s 127 to be valid (i.e without being prejudice to the contention raised herein below), the impugned assessment order having been passed by DCIT Central Circle, Kota, instead of DCIT Circle II Kota (who has been given jurisdiction vide order u/s 127) is bad in law and without jurisdiction. Therefore, the impugned assessment order deserves to be quashed.

II. Invalid order u/s 127

3.1 The relevant facts are that initially the jurisdictional AO of the Assessee was ITO Ward Jhalawar (hereinafter referred to as “Transferee AO’); however, during the assessment proceedings, the jurisdiction was transferred to DCIT Circle-II Kota vide order u/s 127 (hereinafter referred to as “Transferor AO’). However, the assessee was not given any opportunity to file a reply or object to the transfer proceedings as provided under the relevant section. A bare reading of S. 127 -sub-section (1) and sub-section (2) makes it clear that in case of transfer of jurisdiction, the assessee has to be given an opportunity of being heard against such transfer of jurisdiction. However, as per sub-section (3), such a condition of filing a reply is not required to be given if the transfer of jurisdiction is within the same city, locality, or place.

3.2 Importantly, a bare reading of S. 127 makes it clear that the assessee must be given a reasonable opportunity of being heard in all cases where the Transferee AO and the Transferor AO are located in different cities, localities, or places.

3.3 In the instant case, the Assessee is a resident of Bhawani Mandi, whose jurisdictional AO is the Transferee AO i.e. ITO Ward Jhalawar, and his jurisdiction has been transferred to the Transferor AO i.e. DCIT Kota. The distance between Jhalawar and Kota is more than 90 km. Thus, the Transferee AO and Transferor AO do not reside within the same city, locality, or place.

4. Thus, the AO was required to provide opportunity of being heard to the assessee u/s 127, however, in the instant case, pertinently, the assessee was not given such any opportunity u/s 127.

Hence, in view of the above facts and circumstances, since the order u/s 127 itself is without jurisdiction, having been issued without an opportunity of being heard, the consequent impugned assessment order, having been passed by a non-jurisdictional AO, is void ab initio and without jurisdiction.

5. On the other hand, the ld. CIT(A), rejected these contentions vide para 4.3 pg. 4 & 5 of the impugned order. He alleged that the appellant did not furnish any such order u/s 127 but very interestingly at the same time, he also recorded a categorical finding that “the DCIT Central Circle Kota has recorded that due to centralization of the case u/s 127, the case was transferred to this office” thus, he was blowing hot and cold in the same breath. He ignored the notice u/s 143(2) (PB 36-37) by DCIT Circle 2 Kota, nor asked AO. There apart, he alleged that the appeal was not against any such order u/s 127 which contention is completely a misreading of the basic contention raised that the assessment order was passed by a non-judicial AO and is a nullity and hence deserves to be quashed as held in various cases as held in various decisions in High Court and Tribunal. Therefore, the assessment order may kindly be declared as a nullity and be quashed.

G.O.A 2 & 3: Invalid Invocation of Sec 115BBE on Rs.38,00,003/- (wrongly typed as Rs. 70,00,003/-)

1. Section 115BBE wrongly invoked and applied even on assessed business income:

1.1 Legal Position: At the outset, it is submitted that S.115BBE specifically refers to the income which are of the nature as referred in S.68, 69, 69A of the Act being the income from other sources. Therefore, subjected income has essentially to be classified u/s 14 of the Act as income from other sources and that is possible only when the income is not capable of being classified under any other head being income from salary, house property, capital gain, business or profession.

1.2 A combined reading of S. 14 with S. 56 of the Act makes is evidently clear that for the assessment of an income it must have to be classified under four heads of income as enumerated u/s 14 and if it doesn’t fall under any specific head of income as per item A to E of S. 14, such income has to be assessed under the residuary head of income i.e. item F of S. 14. Therefore, income added u/s 68 or 69 etc. has to be given a specific head in terms of S. 14.

1.3 The Hon’ble Supreme Court in case of Karanpura Development Co Ltd v. CIT [1962] 44 ITR 362 (SC) held that these heads are in a sense exclusive to one another and income which falls within one head cannot be brought to tax under another head. Further, the Hon’ble Supreme Court in case of Nalinikant Ambalal Mody v CIT [1966] 61 ITR 428, has held that whether an income falls under one head or another is to be decided according to the common notions of practical man because the Act does not provide any guidance in the matter. Of course, lot of judicial precedents are available to a taxpayer to arrive at a conclusion about determination of appropriate head of income.

1.4 The scheme of sections 68, 69, 69A, 69B and 69C provides that in cases where the nature and source of investments or acquisition of money, bullion or expenditure incurred are not explained at all, or not satisfactorily explained, then, the value of such investments and money, or value of articles not recorded in the books of accounts or the unexplained expenditure may be deemed to be the income. In view of the above, it can be said that for triggering S. 115BBE what is relevant is whether income remains disclosed or undisclosed or explained or unexplained. If the income is disclosed or explained as mandated by the law, then same would be taxable in the ordinary manner. On the other hand, if the income is undisclosed or unexplained then the provisions of section 115BBE may be triggered depending upon the facts involved in each of the cases. The moment a satisfactory explanation is provided about nature and source then the source would stand explained and therefore, the income would be computed under the appropriate head of income as per the provisions of the Act.

1.5 On perusal of the Finance Minister’s speech and Explanatory Memorandum (2), it is clear that the legislative intent behind introduction of section 115BBE was to curb the generation and use of unaccounted money and tax the same at the highest rate.

1.6 It is submitted that whatever was disclosed was nothing but additional income only and it cannot be termed as excess/undisclosed/ unaccounted income for the simple reason that survey was carried out on 16.01.2019 i.e. before ending of the relevant previous year ending. Therefore, the books of accounts of the assessee were not complete on the day of survey. Therefore, such transactions, which were not accounted for then, and which were accounted for thereafter, cannot be termed as excess-shortage/undisclosed/unaccounted money, quantity etc. Even the Return of income was not filed by the assessee, on the date of survey, and rather was filed much later on 24.09.2019 (i.e. after 8 months). At the best, it was only additional income stated during survey. Moreover, the assessee admittedly accounted for such income also in regularly maintained books of account and also declared the resultant income in its ROI. Though the AO specifically admitted this fact (at pg. 3 top of his order) yet copy of Computation of Total Income enclosed herewith (PB 53-56)

Therefore, once a comparison is made between the income shown in the accounts and those in ROI, there will be no difference. Consequently, it cannot be said that there was some excess shortage/undisclosed/ unaccounted income, etc.

2. Undisclosed income- Business income only:

2.1 The admitted (and undisputed facts) are that the only source of income of the appellant is the income from business of wholesale and retail trading of clothes by the proprietor Shri Hiralal Vijawat in reply to answer to Q 9, 12, 13, 14 and 15 (PB 24-31) and as admitted by the Ld. AO himself at Pr. 1 on Pg. 1 that the appellant firm is engaged in wholesale and retail trading of clothes. The assessee was in receipt of the profit on the purchase and sale of fabrics items. There is no other known or unknown source of income, neither stated by the assessee nor by the department. For your ready reference the relevant extracts of Q & A from the statements recorded u/s 133A given by Hiralal are reproduced herein below:

2.2 In the present case, the above facts & circumstances rather very clearly indicated and established that the alleged undisclosed income of Rs. 70,00,003/-, are arising/ resulting from the regular business income only i.e. from trading business and has to be classified u/s 14 r.w.s 28 as business income only and not income from other sources. Additional income was admitted from business only Q/A 14 & 15 (PB 30-31).

2.3 It is submitted that whatever, was disclosed was nothing but additional income only and it cannot be termed as excess/undisclosed/unaccounted income for the simple reason that survey was carried out on 16.01.2019 i.e. before close of the relevant previous year ending on 31.03.2019. The assessee did not yet close the previous year’s books of accounts therefore, unless a comparison is made between the completely prepared books of accounts with the stock, cash or debtors etc. as physically found during the course of survey, it can’t be termed as excess-shortage /undisclosed/unaccounted money, quantity etc. Even the return of income was not filed. At the best it was only additional income stated during survey. Moreover, the assessee admittedly accounted for such income also in regularly maintained books of accounts and also in its ROI. Therefore, once a comparison is made between the income shown in the accounts and the additional income, there will be no difference. Consequently, it cannot be said that there was some excess shortage/undisclosed/unaccounted income, etc.

2.4 It will be appropriate to clarify here that the ld. AR of the assessee vide reply dated 16.09.2021 (uploaded on the income tax portal on dt. 21.09.2021) has given a detailed breakup of additional income of Rs. 70 Lakh, however has unintendedly and inadvertently/ accidental used the word undisclosed instead of the word additional. This word ‘undisclosed’ is only a typographically mistake and was used by mistake in a very causal / routine manner. Yet otherwise and importantly, as per the correct legal position and as per the facts of the case, these are not at all excess/shortage/ unaccounted/undisclosed income of the assessee but was only and simply an additional income.

2.5 It is well settled law that there is no estoppel law under statute. If the parties have wrongly understood or taken a view of certain transactions like in the present case, where the assessee, who is a layman, and the ld. tax consultant even, has mistakenly understood and have shown additional income of Rs. 70 Lacs under two different heads i.e. Rs. 32 lakhs in Income from B&P and Rs. 39 lakhs in Income from Other sources. However, showing Rs. 39 Lakhs as undisclosed/unaccounted income under the head ‘Income from other sources u/s 56, is nothing but a misleading and misinterpretation of the law and result of an erroneous view taken inadvertently and not consciously. Such presentation is not in accordance with the law and the judicial precedents and hence are not binding upon the assessee. Also, kindly refer Point No. 4 below. Survey u/s 133A can be carried out and was conducted on Business premises only hence the impounded papers shall and can relate to business only as held in Nikhar Fashion Pr. 7 to 9 (DC 1225).

The law is well settled that even in case were an admission has been made during survey and search, which is found to be incorrect on facts and in law, the assessee has all the right to correct/modify/retract the same. Kindly refer 72 TTJ 323 (Jd.), 73 ITD 434 (Chd.) & 63 TTJ 236 (Del). It has been held by the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala & Others 91 ITR 18 (SC):

2.6 In the present case, the facts & circumstances rather very clearly indicated and established that the additional income of Rs. 70,00,003/- was business income and not income from other sources. Cumulative reading of Questions and also answers thereto of the statement of assessee, being Q. 8, Q9, Q.11, Q. 13 & Q.15 will make it clear of the statement recorded u/s 131 on dated 16.01.2019 directly support this contention.

2.7 Even the headings of such additional income makes it clear that the said income pertains to business income only, being the following:

Sr. No.	Particulars	Amount (Rs.)
1	Stock	32,00,000/-
2	Cash	8,50,003/-
3	Debtors	15,50,000/-
4	Construction	14,00,000/-
Total		70,00,003/-

2.8 It is submitted that the profit arising from the fabric business, were advanced /given to various debtors. There apart, additional cash found also arose from same business activity. There apart, additional income of Rs. 9.5 Laksh was account of income generated during the relevant years. The said table shows the utilization/availability of the funds under different headings of the asset/expenditure, etc. and their nature also suggest that the additional income was related to/arose during the course of the trading business only. Cash and debtor were nothing but the result of the business only.

2.9 Further, there is no whisper in the entire statement of proprietor Shri Hiralal Vijawat nor any finding recorded in the impugned assessment order u/s 143(3) for A.Y. 2019-20 in case of the appellants that the additional income was something other than the Income from business or that there was some other source of income giving rise to such alleged undisclosed Income. In these circumstances, the only inescapable conclusion is that the such income was nothing but a business income from the fabric business. The very source of alleged undisclosed income emanated from, was well connected with and related to the fabric business transactions alone and not from any other activities or from any other source of income.

3. Accounting: It is submitted that income so surrendered in shape of the unrecorded income were entered in the regular books of accounts. These accounting entries were certainly before the AO who duly examined, which furnished a strong ground to him to take a decision that it was a business income only and S. 115BBE was not applicable.

4. Adverse Observations and Objections raised by the Ld. CIT(A):

4.1 No estoppel against law: It is submitted that the law is well settled that there can’t be any estoppels against the statute. Merely because the assessee has taken a mistaken view of the legal position by showing the income surrendered during the course of survey in a particular head of income numerated u/s 14 of the Act, is a highly technical task. Even a tax consultant/CA may not correctly decide what to talk of a poor ignorant & layman assessee. Acquiescence cannot take away right a party to which he is otherwise entitled to. Further, no tax can be collected without the authority of law as guaranteed by Article 265 of the Constitution of India. Therefore, even if the assessee has made some commitment, it cannot work as an estoppel and the assessee, if still feels aggrieved in any manner, can pursue legal remedy. Hence, showing income under a wrong head in the return of income cannot be taken as an admission.

4.2.1 Kindly refer CIT v. M. Pyngrope (1993) 200 ITR 106 (Gau.), wherein it was held that:

“Appeal (AAC)—Maintainability of appeal—Scope—Denial of liability by assessee within the meaning of S.246(1)(c)—Has wide import and such denial may be by way of appeal—It is not necessary that assessee should have denied liability in return itself.”

4.2.2 CIT v. Apar Limited (2002) 175 CTR 312 (Bombay), wherein it was held that:

“Appeal [CWT(A)]—Maintainability of appeal—Intimation under s. 16(1)(a)(i)—Return filed under protest—Thereby assessee disputed his very liability to wealth-tax—AO could not have foreclosed assessee’s right to appeal by issue of intimation under s. 16(1)(a)(i)—Appeal maintainable under s. 23(1A)(a)”

4.2.3 Mayank Poddar (HUF) v. WTO (2003) 181 CTR 362 (Calcutta), wherein it was held that:

“Estoppel—Applicability of principle—Interpretation of statutes—Scope—There is no estoppels against statute—Property, though not taxable under the WT Act, included by assessee in taxable net wealth by misconception of law—Property does not become taxable.

x x x x x

A property, which is not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. Neither there can be any waiver of the right by the assessee. The Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable.” (Para 11)

4.3 Surrendered income wrongly considered u/s 68 and/or 69A as income of other sources: If the totality of the facts and circumstances and the judicial guideline is considered, the additional income could not be considered of the nature described in the above provisions. Otherwise also on merits once such additional income has already been accounted for before/ at the close of the year nothing remained undisclosed/ unexplained.

4.4 CIT(A) did not apply ration of Rajasthan High Court in Bajranga (supra)

5. Judicial Guideline: The Hon’ble Rajasthan High Court, ITAT Jaipur and various other courts have held that where the additional income/ undisclosed income declared during the course of survey is relatable to some business activity then it cannot be considered to be income from other sources and consequently S. 115BBE cannot be invoked.

5.1 The Hon’ble Ahmedabad Tribunal in case of Chokshi Hiralal Maganlal v. DCIT (ITA No. 3281/Ahd/2009 dated 5 August 2011) held that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure (i.e. in our understanding not connected with business so as to make convenient to invoke aforesaid sections). In case source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim that it cannot be separated from business then first ‘what is to be taxed is the undisclosed business receipt. Only on failure of such exercise, it would be regarded as taxable under section 69 on the premises that such excess investment or asset or expenditure is unexplained and unidentified, satisfying the mandate of the law.

5.2 The Hon’ble Rajasthan High Court in case of CIT v. Bajargan Traders [ITA No. 258/2017 dated 12/09/2017] (DC 9-11) has held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head “business income” and not under the head income from other sources.

5.3 In case of Shri Lovish Singhal v. ITO (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25.05.2018), the Jodhpur Tribunal applying the proposition of law laid down by the Hon’ble Rajasthan High Court in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act and accordingly held that there is no justification for taxing such income u/s 115BBE of the Act.

5.4 Directly covered by ITAT order in other group member case: It will be pertinent to note that the same survey carried out u/s 133A on 16.09.2021 at the place of the assessee was also a survey carried out at the place of other group member namely Alok Vijawat. There also that assessee admitted additional income of 76 lakhs which comprised of the debtors Rs. 45.50 lakhs, excess cash found Rs.95.50 lakhs and construction expenses Rs. 21 lakhs. shop construction expenses, which was duly included in the ITR and normal tax was paid accordingly. Even the assessment was completed u/s 143(3) but the same was revised by the CIT(A) by vide order u/s 263, directing the AO to invoke S.115BBE. The Hon’ble ITAT however decided the issue in favour of the assessee vide its order dated 13.12.2024 in ITA No. 605/JPR/2024 (DC 45-52). Thus, the applicability of S.115 BBE on the additional income in Vijawat group (same group) was denied and hence the same is directly applicable in the case of the present assessee also.

5.5 It is further submitted that on identical facts and circumstances, the Hon’ble ITAT, Jaipur Bench, has already taken a favorable view in the case of Parshavnath Buildestate Private Limited v. ACIT/DCIT, Central Circle, Kota in ITA No. 1357/JPR/2024 (DC 26-33). The Hon’ble Tribunal, after duly appreciating the factual matrix and legal contentions, held in favour of the assessee by deleting the addition made by the AO. The facts in the present case are pari-materia with the facts in the aforementioned case, and therefore, consistent view may kindly be taken in the present appeal also, in the interest of judicial discipline and to avoid conflicting decisions.

5.6 Direct decision on the aspect of wrong head adopted: Smt. Rekha Shekhawat v. Principal Commissioner of Income Tax Smt. Rekha Shekhawat v. Pr.CIT (2022) 219 TTJ (JP) 761(DC 1-8) which directly applicable on the facts of the present case in as much there also, the assessee mistakenly shown the income under the head “income from other sources” whereupon the Hon’ble accepted the contention that there is no Estoppel under law by following the aforesaid decisions and quashed the application of S.115BBE of the Act.

5.6 Several ITAT Benches, Jaipur, Amritsar, Surat, Chandigarh, Chennai/ Rajkot, Rajasthan High Court, MP High Court have taken favorable view.

In the light of above submissions and the legal position, Sec 115BBE cannot be invoked even remotely. Thus, additional income declared during survey of Rs. 70.00 Lacs, could not be subjected to S.115BBE of the Act.

Hence, the entire impugned additions are bad in law and deserves to be deleted.

GOA-4 Charging of Interest u/s 234A & 234C: is consequential and kindly be decided accordingly.

GOA-5 Add, Amend or Alter any of the ground: is consequential and kindly be decided accordingly.

The above submissions have been made based on the instructions and the information provided of/by the client.

6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:

S. No.	Particulars	Page No.
1.	Copy of ITR acknowledgment and ITR dt. 24.09.2019 for A.Y. 2019-20.	1
2.	Copy of the Tax Audit Report for the A.Y. 2019-20 along with the Audited Balance Sheet and P&L Account	2-15
4.	Copies of the Impounded Annexure, AS-5 (Pg. 1 to 8)	16-23
5.	Copies of statement of the appellant recorded u/s 133A dated 16.01.2019	24-31
7.	Notice under section 143(2) dt. 23.09.2020 issued by ITO WD, JHALAWAR	32-35
8.	Notice under section 143(2) dt. 15.10.2020 issued by DCIT/ACIT, CIRCLE-2, KOTA	36-39
9.	Copy of Written Submission filed before the CIT(A) dt. 17.03.2025.	40-52

Case laws relied upon:

S.No.	PARTICULARS	Pg. No.
1.	Smt. Rekha Shekhawat v. Pr.CIT (2022) 219 TTJ (JP) 761(relevant extract only)	1-8
2.	Principal Commissioner of Income-tax v. Bajargan Traders 295/[2024] 466 ITR 397 (Rajasthan) (Rajasthan) HC	9-11
3.	Nikhaar Fashions v. ACIT [IT Appeal No. 1020(JPR) of 2024, dated 21-11-2024]	12-25
4.	Parshavnath Buildestate Private Limited v. ACIT [ITAppeal No. 1357 (JPR) off 2024, dated 19-3-2025] (relevant extract only)	26-33
5.	Bharat Associates v. ACIT [IT Appeal No. 1293(JPR) of 2024, dated 17-4-2025]	34-44
6.	Alok Vijawat v. PCIT (Udaipur) [ITA No. 605(JP) of 2024, dated 13-12-2024]] (relevant extract only)	45-52

7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the ld. CIT(A) granted part relief but on the same logic the assessee is supposed to get full relief as the source being same there cannot be contradictory finding by the ld. CIT(A).

8. Ld. DR heavily supported the orders of the lower authority. He raised the various contention which were also submitted in the written submission filed which reads as under :

1. Facts of the Case

1.1 During the course of survey conducted u/s 133A of the Income Tax Act, 1961 (hereinafter referred to as “Act”) on 16.01.2019, the statement of Shri Hiralal Vijawat was recorded u/s 131 of the Act. Subsequently, the case of the assessee was selected for compulsory scrutiny and the assessment order was passed on 30.09.2021 u/s 143(3) of the Act vide which the total income of the assessee was assessed at Rs. 75,87,377/-. In the said assessment order, out of assessed income of Rs. 75,87,377/-the assessed income of Rs. 70,00,003/- was taxed as per the provision of section 115BBE of the Act. The break up the amount of Rs. 70,00,003/- is as under:

Amount (in Rs.)	Nature of assessee income
8,50,003	Unaccounted cash
32,00,000	Unaccounted excess stock
14,00,000	Unaccounted investment in construction of Shop
15,50,000	Unaccounted cash given to the debtors

1.2 Aggrieved with the said order, the assessee filed appeal before the Ld. CIT(A) and the appeal of the assessee was partly allowed by Ld. CIT(A) vide order dated 31.03.2025. In the said order, the Ld. CIT(A) upheld the applicability of section 115BBE of the Act on the amount of Unaccounted cash, Unaccounted investment in construction of Shop and unaccounted cash given to the debtors (as mentioned in para 1.1 above). On the issue of unaccounted excess stock the Ld. CIT(A) granted relief to the assessee.

1.3 On the issue unaccounted stock, the Ld. CIT(A) held that the amount of the said excess stock should be treated as business income of the assessee and while adjudicating the said issue the Ld. CIT(A) placed reliance upon the decision of Hon’ble High Court of Rajasthan in the case of Pr. CIT v. Bajargan Traders (D.B Appeal no. 258/2017 dated 12.09.2017).

1.4 Aggrieved with the order of Ld. CIT(A), the assessee filed appeal before the Hon’ble ITAT.

2. Proceedings before Hon’ble ITAT:

2.1 During the course of hearing on 23.07.2025, the Ld. AR furnished a written submission before the Hon’ble ITAT on each ground of appeal filed by the assessee and the same are discussed as under:

A. The Ld. AR has submitted before your honours that the notice u/s 143(2) of the Act was issued by the non-jurisdictional assessing officer viz. ITO, Ward Jhalawar. Therefore, the Ld. AR has requested that the impugned order deserves to be quashed.

Rebuttal on above contention:

In this regard, the report of AO is attached with this annexure for your kind reference. Further, the observation made by the Ld. CIT(A) vide para 4.3 of the order dated 31.03.2025 is also relevant in this regard wherein the ground no. 1 raised before the Ld. CIT(A) was dismissed.

As mentioned in Para 3 of the AO’s report that as the income of the assessee was above the monetary limit mentioned therein so the case of the assessee was transferred to DCIT, Circle-2, Kota. Hence, it is evident that when the assessee has disclosed the income of relevant A.Y. more than Rs. 15 Lacs, the case was transferred to the Officer as per the monetary limit. Thereafter when the case of the assessee was transferred from the DCIT, Circle-2, Kota to DCIT, Central Circle-Kota, the said transfer took place within the same city and the provisions of section 127(3) of the Act are relevant in this regard and the same is reproduced as under:-

“Power to transfer cases.

127. (1).

(2).

(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.”

Therefore, the contention of the Ld. A/R that the order u/s 127 of the Act is invalid is not a valid argument in the light of above mentioned facts.

Without prejudice to the above, the provisions of section 292BB of the Act are reproduced as under:

“Notice deemed to be valid in certain circumstances.

292BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was-

(a) not served upon him, or

(b) not served upon him in time; or

Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment”

Hence, it is evident from the AOs report and the applicability of the provisions of section 292BB of the Act that the argument of the Ld. AR in respect of ground of appeal no. 1 is not acceptable.

B. The Ld. AR has submitted that the section 115BBE of the Act has been wrongly invoked and applied even on the assessed income. The Ld. AR has also submitted that at the time of survey whatever was disclosed was the additional income only and it cannot be termed as excess/undisclosed/unaccounted income for the reason that the survey was carried out on 16.01.2019 i.e before the ending of the relevant previous year. The Ld. AR has also submitted that the assessee has admittedly accounted for such income in the regularly maintained books of account and also declared the resultant income in its ROI.

The gist of the argument is that on the day of survey the books of accounts were not complete and while filing the ROI for the relevant AY, the left out transaction were incorporated.

C. The Ld. AR of the assessee has also contented that during the course of survey proceedings no other source of income was stated by the assessee nor by the department other than income from business of wholesale and retail trading of clothes by proprietor Shri Hiralal Vijawat.

D. The Ld. AR of the assessee has also stated in the written submission that there is no estoppel law under the statute (in support of this argument the Ld. AR has relied upon the case laws cited in the written submission) to support the contention that it was Ld. tax consultant’s mistake to segregate the Rs. 70 lakhs under two different heads i.e Rs. 32 lakhs in income from B&P and Rs. 39 lakhs in the income from other sources.

Rebuttal of above contention:

The contention of the Ld. AR that on date of survey the books of accounts were not complete. It is possible that this scenario might be encountered during the course of survey proceedings as one cannot expect that the books of accounts to remain updated on every day. However, it is also logical to infer that in such a scenario, there would always be presence of basic documents that would prove that the transactions, that assessee wants to rely upon for making a claim that the unrecorded/unaccounted transactions are actually the business transactions, are genuine business transactions. In such a situation the argument of the Ld.AR could be accepted as the assessee should have proved, during the course of survey, the genuineness of the transaction entered into by the assessee which could not be entered into books of account for some foreseen/unforeseen reasons. If that be so, the updation of accounts subsequent to survey to arrive at the correct income would still be permissible, because such entries are backed by necessary evidences duly found during the search/survey/enquiries itself. This situation would be entirely different from the situation where of in evidence was respect supporting investments/assets/transactions and which were also unrecorded in no found books of accounts as on date of search/survey.

In the instant case, it is pertinent to note that during the survey proceedings the assessee was asked to explain, vide question 9 during the course recording of statement of assessee, the difference between the amount of cash found in the business premises of the assessee vis-a-vis the amount of cash recorded. To this, the assessee stated that that the additional cash found is his income of the current financial year and he also stated that he has no explanation to offer in this regard. It is for this reason that the assessee while filing the return of income of the relevant assessment year did not disclose the said income under the head “profit and gain from business and profession” and the same was disclosed under the head “income from other sources”.

However, the assessee failed to appreciate the fact that just by disclosing the excess cash found under the head “income from other sources does not absolve the assessee from the onus to prove the nature and source of this excess cash amounting to Rs. 8,50,003/- found during the course of survey proceedings. The assessee nowhere stated that the excess cash found was as a result of the sale undertaken by his proprietorship concern.

Further, in reply to the question no. 15 that was asked during the course of survey proceedings, the assessee stated that the amount of Rs. 15,50,000/- pertains to the money that has been given as borrowings to various persons which have not been entered in the books of account of assessee. Similarly, the assessee in reply to question no. 16 had stated that the amount of Rs. 14,00,000/- is actually the amount of expenditure incurred on construction of first and second floor of the building. Though the assessee has claimed it to be from business income but the assessee has not submitted any documentary evidence to substantiate this fact. In absence of any conclusive documentary proofs that establish the fact that the proceeds of sales of business have been used for the giving borrowings and for construction purpose the onus to explain the nature and source of the income does not stands discharged on the part of assessee.

Therefore, it evident from the above that in the case of assessee, mere recording the investments subsequently after search/survey but without explaining any source or proved by other evidences about its source (which is the primary condition), would not fulfil the conditions for purposes of getting out of the sweep of section 69/69A. If the recording of transactions/investment/receipts from unexplained sources without corroborating evidence subsequent to search/survey date were to be considered as meeting the requirement of condition u/s 69/69A of being recorded in books of accounts, then there would be no case where 69/69A could be applied.

In this regard, the reliance is also placed on the decision of the Hon’ble High Court of Punjab and Haryana in the case of Kim Pharma (P.) Ltd v Commissioner of Income Tax 153 (Punjab & Haryana) (copy enclosed herewith) wherein the Hon’ble High court held that where the amount surrendered during the survey was not reflected in the books of accounts and no source from where it was derived was declared by the assessee, it was assessable as deemed income of assessee under 69A of the Act and not business income.

In this regard, the reliance is also place on the decision of the Hon’ble ITAT Ahmedabad in the case of Shiv Shakti Enterprise v. Principal Commissioner of Income-tax 492 (Ahmedabad – Trib.) (copy enclosed herewith). The facts of the case are as under.

➤ In this case, during the course of survey proceedings, one of the working partners of the firm in his statement admitted that the amount of Rs. 1,01,00,000/-is the net undisclosed income of the assessee firm. However, when the return of income of A.Y 2017-18 was filed by the assessee firm, the amount of Rs. 1,01,00,000/- was disclosed under the head “any other income”. The assessment of the assessee was completed by the AO by making of a disallowance of a sum of Rs. 4,072/- on account of disallowance out of claim of partner’s remuneration. The Principal CIT initiated proceedings under section 263 of the Act on the ground that the AO computed the tax liability in respect of the aforesaid undisclosed income accepted/acknowledged by the assessee during the course of survey proceedings amounting to Rs. 1,01,00,000/- at normal rate of tax of 30% as against the higher rate as provided under section 115BBE of the Act of 60%. Accordingly, Principal CIT took the view that the aforesaid income should have been brought to tax under section 69A r.w.s. 115 BBE of the Act.

➤ The counsel of the assessee submitted before the Hon’ble High Court that the provisions of section 115BBE are not attracted in the first instance for the reason that certain unaccounted money was admitted by the assessee during the course of survey proceedings, which was also reflected by the assessee in the return of income filed by the assessee for the impugned assessment year.

In view of the above facts of the case, the ITAT Ahmedabad held that Principal CIT has not erred in facts and in law in holding that the order passed by the assessing officer was erroneous and prejudicial to the interests of the Revenue.

In both the above case laws relied upon, the adjudicating authorities were aware of the fact that the appeal, which had travelled to their respective floor, were arising out of the survey action only. However, it is pertinent to note that the Act nowhere states that if a survey is conducted then just because the premises where the survey is conducted happen to be always a business premises or a place where books of accounts are kept, the section 68, 69, 69A and 69B become inoperative. Whenever certain transaction/cash are found during the course of survey proceedings and the assessee is unable to give a satisfactory explanation in respect to the nature and source alongwith relevant documentary evidences then the AO is authorized to invoke the deeming provisions provided in the Act to handle such scenarios and tax the receipt as per the nature of unexplained transaction/cash.

Further, it is evident from the above mentioned two case laws that even if the undisclosed income is disclosed in the return of income under the head “profit and gain of business or profession or under the head “income from other sources”, the most crucial factor in order to ascertain the head of income under which it should fall is to substantiate the nature and source of the transaction/undisclosed income unearthed during the course of survey action. The principle of estoppel not being applicable in case of assessee, that has been argued upon by the Ld. AR, is immaterial because till the head under which the assessee has offered the income (while filing the return of income) is explained satisfactorily for it to be actually worthy of coming within the ambit of a particular head of income, the assessee cannot be allowed to escape the rigours of section 115 BBE of the Act when the assessee has not explained the nature and source of the income that was found undisclosed during the course of survey.

Further, it is pertinent to note that the Hon’ble High Court of Gujarat in Fakir Mohamad Haji Hasan v. CIT [2001] 247 ITR 290/Fakir Mohmed Haji Hasan v. CIT 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat). In that case, interpreting the scope and describing the scheme of ss. 69, 69A, 69B and 69C of the Act, it was observed:

“The scheme of ss. 69, 69A, 69B and 69C of the IT Act, 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under s. 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from ‘other sources’ which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under s. 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of ss. 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions etc, applicable to the relevant head of income under which such income falls will automatically be attracted.

The opening words of s. 14 ‘save as otherwise provided by this Act’ clearly leave scope for ‘deemed income’ of the nature covered under the scheme of ss. 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from ‘other sources’ because the provisions of ss. 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion etc. and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head ‘Income from other sources. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of ss. 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions.”

Further, it is pertinent to note that section 14 starts with “Save as otherwise provided by this Act… it means that if it is elsewhere provided in the Act

that income has to be considered according to those provisions then provisions of section 14 would not be applicable. In other words, the deemed income under section 69, 69A, 69B & 69C can be taxed separately and need not necessarily be brought under any other head. Once Hon. Gujarat High Court in Fakir Mohmed Haji Hasan (supra) laid down that if an asset is found undisclosed then unexplained investment therein has to be taxed as deemed income under section 69A or section 69B as the case may be.

Also, if the version of legal position as per the opinion of the Ld. AR (para 1.1 and para 1.2 of the written submission) is accepted then it would lead to a scenario that any unexplained income of the nature as described in section 69, 69A, 69B & 69C and sought to be taxed has to be necessarily brought under any one head as enumerated in section 14. Then the opening words of that section “Save as otherwise provided by this Act..” will become otios and meaningless. No words of the Statute can be read as meaningless, irrelevant or otiose. Therefore, this interpretation sought to be advanced by the Ld. AR is not acceptable. It is also not correct to infer that if any income is not brought to any of the heads as mentioned in section 14 then such income would be headless and, therefore, would go beyond computation machinery and hence will become untaxable. The provisions of deemed income mentioned in the several provisions of the Act take care of such income which may directly not fall in any of the heads, mentioned in section 14.

Therefore, in light of the discussion in preceding paragraphs and the observation of the Hon’ble High Court of Gujarat in the case of Fakir Mohamad Haji Hasan (supra), it is amply evident beyond an iota of doubt that the AO has taxed the amount of unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/- correctly as per section 115BBE as the transactions pertaining to the said amount remained unexplained in absence of necessary evidences to support such transactions.

E. The Ld. AR of the assessee has also submitted that the Ld. CIT(A) has not applied the ratio of decision pronounced by the Hon’ble High Court of Rajasthan in the case of Principal Commissioner of Income-tax v Bajargan Traders Principal Commissioner of Income-tax v. Bajargan Traders 295/[2024] 466 ITR 397 (Rajasthan).

Rebuttal of above contention

The contention of the assessee is not tenable in the light of relief provided by the Ld. CIT(A) in respect of the excess stock amounting to Rs. 32,00,000/- on page no. 19 of the appellate order dated 31.03.2025. While giving the relief, the Ld. CIT(A) has relied upon the decision of the Hon’ble High Court of Rajasthan in the case of Bajargan Traders (supra).

It is also pertinent to note that facts of the case of Bajargan Traders (supra) were not the same in respect of the relief sought in respect of unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/- that has been offered as “income from other sources” while filing the return of income of relevant assessment year (though assessee claims it to be business income).

In the case of Bajargan Traders (supra), a survey u/s 133A of the Act was conducted at the business premises of the assessee on 08.11.2012.

During the survey operation, the assessee has surrendered an amount of Rs. 70,04,814/- on account of a major discrepancy in stock of rice which had hitherto not been recorded in books of accounts. There was no issue other than excess stock involved in the said case law relied. upon by the L.d. AR. However, in the case of assessee there are issues other than the issue of excess stock. Moreover, the relief in respect of excess stock has already been given to the assessee by the Ld. CIT(A).

F. The Ld. AR of the assessee has also placed reliance on the case Chokshi Maganlal v. DCIT (ITA No. 3281/Ahd/2009) dated August 2011 to submit that for invoking deeming provisions under section 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure. Here, the Ld. AR has also incorporated his understanding to state that as per his view such asset or expenditure shall not be connected with business.

Remarks on above contention

➤ The case law relied upon by the Ld. AR relates to the issue of penalty levied by te AO observing that the appellanthas concealed the value of excess stock found during the survey.

➤ In the said case, the survey was conducted at the premises of the assessee jeweller and the excess stock of gold ornaments and silver ornaments totalling to Rs. 35,70,518/- was found. Moreover, in the said case, while adjudicating the quantum of addition made by the AO, the Hon’ble ITAT vide para 9 of its decision dated 21.01.2011 made following observation:

“.9. Since in the present case excess stock found during the survey is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the survey officers, the provisions of section 69B cannot be made applicable as primary condition for invoking the provisions of section 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock is a result of suppression of profit from business other the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in the excess stock has to be treated as business income as per detailed reasons given in the case of Fashion World (supra). Once excess stock is treated as business income then assessee is entitled for higher remuneration to the partners as per section 40(b). As a result, this ground of assessee is allowed.”

Hence, it is evident from the above that the issue under consideration, interalia, in the said case was that whether the excess stock found shall be treated as business income or not and whether the assessee is entitled to giving higher remuneration to the partners u/s 40(b) or not.

➤ In the case of assessee, the Ld. CIT(A) has already given relief to the assessee with respect to the excess stock and in light of the said fact, the facts of the case law relied upon by the Ld. AR is not applicable in the case of assessee as the issue of excess cash, construction expenditure and advances/borrowings to others was never the subject matter of adjudication in the case law relied upon by the Ld.AR.

G. The Ld. AR of the assessee has also relied upon the decision pronounced in the case of Shri Lovish Singhal v Income Tax Officer (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25.05.2018) by Hon’ble ITAT, Jodhpur bench, Jaipur that has placed reliance upon the decision pronounced by the Hon’ble High Court of Rajasthan in Bajargan Traders (supra).

Remarks on the above contention

In this regard, it has already been discussed above that the relief has been given by the Ld. CIT(A) to the assessee relying upon the decision pronounced by the Hon’ble High Court of Rajasthan in the case of Bajargan Traders (supra).

Further, it is pertinent to note that in the case of Shri Lovish Singhal (supra) the Hon’ble ITAT, vide para 13 of its decision, had observed that the excess cash was found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. However, in the case of assessee nowhere it has been proved by the assessee that the excess cash that has been found is out of sale proceeds of business that were not accounted for during the course of survey. This aspect has also been discussed by the Ld.CIT(A) on page no 19 and page no 20 of its order while adjudicating the issue of excess cash. It is also pertinent to note that during the course of recording of statement during the survey proceedings, the assessee, in reply to question no 9. has stated (with regards to the excess cash amounting to Rs. 8,50,003/-found) in hindi that इसके बारे में मेरे पास कोई स्पस्टीकरण नहीं है। इसे मैं अपनी चालू आय के अलावा अपनी आय मानता हूँ और इसे Tax के लिए Surrender करता हूँ।

The discussion in preceding paragraph makes it evident that nor the assessee was able to explain the source of cash neither the assessee was able to establish the link of such excess cash found during the course of survey proceedings with his business. The assessee, being aware of this fact, therefore, filed the return of income for the relevant assessment year and disclosed this amount as “income from other sources”. Moreover, even during the course of assessment proceedings, the assessee was unable to establish the business link of the excess cash found during the survey.

In view of the above, the case law relied upon by the Ld. AR is of no help to the assessee

H. The Ld. AR, on page no. 10 of written submission, has mentioned submitted an argument under the head Accounting. It has also mentioned in the said para that These accounting entries were certainly before the AO who duly examined, which furnished a strong ground to him to take a decision that it was a business income only and S. 115BBE was not applicable.

Remarks on above contention

The assessing officer has categorically stated in the assessment order that the assessee was unable to establish the business link in respect of the entire amount surrendered during the course of survey. Further, the assessee himself disclosed amount if unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/- under the head “income from other sources”. This implies that the assessee was fully aware of the fact that for the aforesaid amount there is no link of said amount with business.

1. The Ld.AR has relied upon the decision of Hon’ble ITAT Jaipur bench in the case of Alok Vijawat v. PCIT (ITA No. 605/JP/2024) to advance the argument that the section 115BBE of the Act cannot be invoked in the case of assessee.

Remarks on above contention

The facts if the case law relied upon by the assessee is distinguishable on facts for the reason that in the said case the AO had passed assessment order accepting the contention of assessee that the surrendered income as business income. Thereafter, the PCIT invoked the powers u/s 263 of the Act and observed that the surrendered income was required to be taxed as per section 115BBE of the Act.

During the proceedings of appeal before Hon’ble ITAT in the said case (the case law relied upon by the Ld.AR), the relevant observation of the Hon’ble ITAT are as follows while adjudicating the said case

(a) While conducting the assessment proceedings the Id. AO initiated a specific enquiry to the assessee and a show cause notice was issued proposing the variation in the assessment asking the assessee-appeallant as to why the provision of section 115BBE should not be applied vide notice dated 24.09.2021.

(b) Thus, here it is not the case of the revenue that the assessing officer has not raised the issue and has not conducted any enquiry, but while doing so he has applied his mind and taken a plausible view on the matter. That view so taken being not erroneous and prejudicial Id. PCIT merely cannot impose her view that the Id. AO should have considered that income so offered u/s 69 as Unexplained investment for Rs. 66,50,000/- (45,50,000+21,00,000) and Rs. 9,50,000/-(Unexplained Money) u/s 69A of the Act.

(c) The phrase “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two view are possible and AO has taken one view with which the Id. PCIT does not agree, it cannot be treated as as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law.

Thus, it is evident from the above that the Hon’ble ITAT did not decide on the merits of the amounts surrendered during the survey in the sense that whether this should be categorised as business income or should be categorised under the deeming provisions of the Act. The issue that was adjudicated was that once the proper enquiry has been undertaken by the AO during the course of assessment proceedings and the AO has reached at a conclusion vis-a-via taxability of the amount surrendered during the course of survey proceedings then the PCIT cannot impose her view. In light of this observation, the Hon’ble ITAT held that the order passed by the AO was not erroneous and hence the order passed u/s 263 of the Act by PCIT was quashed.

In contrast to the above, in the case of the assessee, the assessee has not been able to satisfy the AO, with the help of conclusive documentary evidences, that how the amount of unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/- (which was offered as income from other sources in the return of income filed for relevant assessment year) was actually a business income of the relevant assessment year. In this regard, the reply furnished by assessee in response to the show-cause notice dated 15.09.2021 may be perused which is made part of the assessment order (on page no. 3) wherein not even an iota of documentary proof in support of business income, in respect of the amount of unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/-, has been discussed/furnished by the assessee. Hence, the case of the assessee is clearly distinguishable from the fact of the case of Shri Alok Vijawat where the AO had treated the surrendered income as business income not on the basis of “buying peace of mind” but on the basis of submission made before the AO to his/her satisfaction.

J. The decision of the Hon’ble ITAT, Jaipur bench, Jaipur in the case of Parshvnath Buildestate Private Limited v. The ACIT/DCIT (ITA No 1357/JPR/2024) has been relied upon by the Ld. AR.

Remarks on the above contention

The relevant portion of observation made by the Hon’ble ITAT in the abovementioned case is as under:

(a) It is pertinent to note that in the case law relied upon by the assessee, it has been observed by the Hon’ble ITAT that during the course of recording of statement (during the survey proceedings) the assessee explained the source of expenditure of Rs. 2,00,10,200/- and unexplained investment of Rs. 8,90,000/- for which the Id. AO accepted the source of unexplained investment and did not consider it as amount chargeable to special rate but only Rs. 2,00,10,200/- were considered to be taxed as per the provisions of section 69C of the Act.

(b) The Hon’ble ITAT also observed that the oral evidence submitted by the assessee in a statement cannot be ignored and in fact the same have been accepted by the revenue. Considering the discussion so recorded and the facts which are not disputed that income of Rs. 2,01,00,000 from business already been taxed the subsequent expenditure from that income cannot be considered as unexplained expenditure.

Therefore, it is evident from the above that in the case law relied upon by the Ld. AR it was held by the Hon’ble ITAT that when the surrendered income has been accepted as business income then the expenditure whose sources is rooted in the said business income cannot be held as unexplained expenditure. This is not the fact of the case of assessee. In the assessee’s case, though the assessee has made an attempt to categorise the surrendered income as business income by relying on various case laws but neither at the time of survey proceedings nor at the time of assessment proceedings has been able to prove through documentary evidences that the surrendered income was the business income of the relevant assessment year. Hence, the case law relied upon by the Ld. AR is of no help to the assessee.

K. The decision of the Hon’ble Rajasthan High Court in the case of Rekha Shekhawat v. Principal Commissioner of Income Tax, Udaipur Smt. Rekha Shekhawat v. Pr.CIT (2022) 219 TTJ (JP) 761has been relied upon by the Ld. AR for advancing the argument in respect of wrong head adopted.

Remarks on the above contention

The case law has been relied upon by the assessee in order to emphasise the fact that there are no estoppels against statutes. In the case law relied upon by the Ld.AR, the assessee had declared the surrendered income under the head income from other sources. It is pertinent to note that this aspect has been dealt with in detail in the discussion held in paras above in this rejoinder.

Also, it is pertinent to note that in the case law relied upon by the Ld.AR, the AO had once applied his/her mind and thereafter the powers u/s 263 of the Act were invoked by the Pr.CIT wherein it was held that the income surrendered during the course of survey proceedings ought to be taxed u/s 115BBE of the Act as this income pertains to recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 of the IT. Act (unexplained cash credit) and section 69A of the IT. Act (unexplained money).

Hence, it is evident that the AO concerned had accepted the explanations of the assessee after the enquiry undertaken by the assessee after considering the submissions of the assessee in the case law relied upon by the assessee.

However, in the case of assessee Hiralal Vijawat, the assessee did not discharge the onus to prove even in reply to the show cause notice dated 15.09.2021 issued during the assessment proceedings that the surrendered income of unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/- was his business income with the help of supporting evidences to establish that the transaction of corresponding sale and purchase undertaken with persons, say, X, Y, Z etc. Neither was assessee able to furnish the quantity of goods sold for earning the source of surrendered income nor the assessee was able to establish any remotest nexus of surrendered income with his business. Hence, the facts of the case law are not applicable in the case of assessee.

L. It is also pertinent to note that the Hon’ble ITAT, Jaipur Bench, Jaipur vide Order pronounced on 29.08.2024 in the case of Rajeev Jain v. PCIT (Central), Jaipur in ITA No. 644/JP/2024 made a relevant observation which is applicable in the case of assessee as well. The relevant facts are discussed as under.

➤ In the said case, the survey action u/s 133A of the Act was carried out on 11.10.2017 at the business premise of assessee firm Sandeep Micron.

➤ During the course of survey proceedings the stock of Rs. 22,60,188/-was found on physical verification, whereas as per the books of account the available stock was Rs. 7,39,012/-. The assessee was not able to give satisfactory explanation in respect of the said discrepancy and surrendered the difference of amount of Rs. 15,21,176/- (Rs. 22,60,188/-less Rs. 7,39,012/-) as the income of the year under consideration. The assessee declared the said amount of Rs. 15,21,176/- in the Return of Income filed for the year under consideration and paid due taxes thereon. The Ld. PCIT invoked the provisions of section 263 of the Act on the ground that the amount of Rs. 15,21,176/- was required to be taxed u/s 115BBE of the Act but during the course of assessment proceedings the tax liability on the said amount had been determined as per slab rate of taxation applicable to an individual.

➤ During the course of proceedings before the Hon’ble ITAT, the Ld. AR of the assessee relied on the decision of the Hon’ble Rajasthan High Court in the case of Pr. CIT v. Bajargan Traders (D.B Appeal no. 258/2017 dated 12.09.2017) and the relevant Para 9 of the Order dated 29.08.2024 passed in the case of Shri Rajeev Jain is reproduced as under.-

“9. The Id. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee has declared the business stock and as per provisions of the act and considering the decision of the Hon’ble Rajasthan High Court in the case of PCIT v. Bajargan Traders DBITA No. 258/2017 dated 12.09.2017 wherein it is held that the income being disclosed as business income the provisions of section 115BBE cannot be invoked in the present set of facts and circumstances to support this contention, the Id. AR of the assessee also relied upon the various case laws as listed in the written submissions hereinabove.”

Hence, it is evident from the above that the Ld. AR of the assessee relied on the fact that since the excess stock was pertaining to his business so the same is required to be treated as business income.

➤ Further, the relevant submission of Ld. DR which is mentioned in Para 10 of the Order dated 29.08.2024 passed in the case of Shri Rajeev Jain is reproduced as under:-

“10. Per contra, the Id. DR objected to the fact presented before the Bench, Id. DR drawing our attention to page No. 13 of the paper book so filed by the assessee wherein the profit and loss account is filed as it is an evident from the profit and loss account that the assessee has separately offered income to the extent investments made in the excess stock as other income and not as business income part of the excess stock in the trading account. Since it is separate income earned and invested in the excess stock and it has not been demonstrated that the income so disclosed is the same as of the business carried out by the assessee, the contentions raised by the Id. AR of the assessee is different and the case laws relied upon the Id. AR of the assessee are being on the different set of facts not applicable to the present facts of the case. Accordingly, the Id. DR relied upon the detailed finding as recorded in the order of Id. PCIT.”

> Thereafter, the observation made by the Hon’ble ITAT while adjudicating the case in the favor of Department is also relevant and the same is reproduced as under-

“. As is evident from the above profit and loss account that the assessee has separately offered income to the extent investments made in the excess stock as other income. Thus, that Income is not disclosed as excess stock in the trading account. Since it is separate income earned and invested in the excess stock it has not been demonstrated that the income so disclosed is the same as of the business carried out by the assessee. The contentions raised by the Id. AR of the assessee is different and the case laws relied upon the Id. AR of the assessee is different in the set of facts same are not applicable to the present facts of the case. Thus, when the assessee has disclosed the income for which there is no explanation about its source the said income is subjected to tax as per provision of section 68 of the Act and the accordingly provision of section 115BBE is applicable. Since, that aspect of the matter has not been considered while assessing the income of the assessee and even the question no quoted in the order being 21 is also not correct Income is disclosed based on the question no. 19. All these aspects suggest the order of assessment has been passed in a mechanical manner without appreciating the facts and explanation offered with that of the record is not verified we confirm the view of the Id. PCIT. Based on these observation ground no. 2 raised by the assessee is dismissed. Ground no. 1 and 3 being general and no specific grievance or arguments raised same are not adjudicated and for ground no. 4 there is no submission or contention raised by the assessee and since the appeal of the assessee is dismissed the ground has no merit and same is dismissed.

In terms of these observations, the appeal of the assessee in ITA no. 644/JP/2024 stands dismissed.”

➤ In view of the above, it is pertinent to note that as the income disclosed as excess stock was not included in the Trading A/c and it was shown as separate income earned as invested in excess stock so the Hon’ble ITAT observed that it has not been demonstrated that the income so disclosed is the same as that of business carried out the assessee. Further, the case laws relied upon by the Ld. AR were also held by the Hon’ble ITAT not to be applicable in the case of Shri Rajeev Jain.

In the case of Shri Hiralal Vijawat, the unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/-and unaccounted investment in construction of shop amounting to Rs. 14,00,000/-was also offered to tax under the head “Income from Other Sources and the Ld. AR has also relied upon the decision of Hon’ble High Court of Rajasthan in the case of Bajargan Traders (supra) to argue the case in favor of the assessee.

However, as observed by the Hon’ble ITAT in the case of Sh. Rajeev Jain (supra), the assessee has not been able to explain about its source and hence the aforesaid three amounts have rightly been taxed by the AO under the deeming provisions of the Act. Merely arguing that it was by mistake that the aforesaid three amounts were included under the head “Income from Other Sources” instead of “Profit and Gains of Business and Profession” does not allow the assessee to escape from offering the explanation in respect of the nature and the source of income as rightly held by the Hon’ble ITAT, Jaipur Bench in the case of Sh. Rajeev Jain (supra). Hence, the Ld. AR’s contention that the above mentioned three amounts (unaccounted cash amounting to Rs. 8,50,003/-, unaccounted cash given to debtors amounting to Rs. 15,50,000/- and unaccounted investment in construction of shop amounting to Rs. 14,00,000/-) should be treated as Business Income is not an acceptable argument.

Ld. DR also relied upon following the judicial precedent in support of the contentions raised;

•

Kim Pharma (P.) Ltd. v. Commissioner of Income-tax 153 (Punjab & Haryana)

•

Shiv Shakti Enterprise v. Principal Commissioner of Income-tax 492 (Ahmedabad – Trib.)

•

Fakir Mohmed Haji Hasan v. CIT 11 (Gujarat )

•

Rajeev Jain v. PCIT(Central) [IT Appeal No. 644(JP) of 2024 dated 29-08-2024] (Jaipur Trib.)

•

Svetlana Gorodinskaia v. ACIT [ITAppeal No. 202(Chd) of 2023,dated 24-05-2024] (Chandigarh Trib.)

•

Rajesh Kumar Bajaj v. ACIT [IT Appeal No. 16(Ind) of 2019,dated 09-03-2020] (Indore Trib.)

9. We have heard the rival contentions and perused the material placed on record. Vide ground no. 2 & 3 the assessee challenges the finding of the ld. CIT(A) holding that considering the facts of the case the income which was offered for tax was chargeable to tax as per provision of section 115BBE of the Act.

1. Unaccounted cash	Rs. 8,50,003/-
2. Unaccounted excess Stock	Rs. 32,00,000/-
3. Unaccounted cash given to debtors	Rs.15,50,000/-
4. Unaccounted investment in	Rs.14,00,000/-
Construction of shop Total	Rs. 70,00,003/-

The assessee had included this offered income of Rs. 70,00,003/- while filling his return of income filed for the relevant year and paid tax at normal rate thereon. Whereas ld. AO noted that as the unaccounted/unexplained cash payment to debtors, investment made in construction of shop, excess cash and excess stock are covered u/s 69, 69A and 69B respectively, therefore tax should be charged as per the provision of section 115BBE of Act.

When that finding of the ld. AO challenged before the ld. CIT(A), ld. CIT(A) accepted that the income to the extent of the excess stock were considered as business income and thereby the contention of the assessee was considered even that income is of the same portion of the undisclosed income disclosed by the assessee. Whereas ld. CIT(A) has not considered the contention of the assessee to the extent of cash given to debtors of Rs. 15,50,000/-, investment in construction of shop of Rs. 14,00,000/- and excess cash of Rs. 8,50,003/- were considered to be charged as per provision of section 69A and 69B of the Act and accordingly ordered to tax as per provision of section 115BBE of the Act.

The bench noted the excess stock investment was considered by the ld. CIT(A) considering the decision of our Rajasthan High Court in the case of M/s. Bajarang Traders.

The bench noted that the assessee has offered the income at Rs.77,59,130/- in the return of income filed u/s. 139 of the Act. There is no adjustment of the head of income as declared by the assessee and thereby without doing so how the income which is already supported by a statement that the same is out of the business income be considered as income as per provision of section 68/69A,B & C of the Act. Had it be the intention of the ld. AO then the ld. AO should have discussed how the income is offered and how intend to tax the same should have been bifurcated under the various head income so as to tax that income at special rate. The bench noted that on the same set of facts the ld. CIT(A) granted relief to the assessee on the excess stock found as Business income of the assessee.

Having noted that finding by the ld. CIT(A) the bench noted that second issue is of excess cash and unaccounted cash given to Debtors. Once excess cash found at the business premises and the same is parly considered to be financed for excess stock then why the balance cash be considered as unexplained money. Similarly the assessed disclosed Rs. 15,50,000 as the money given to debtors and Rs. 14,00,000/- in construction of shop. The assessee has provided the list and there is no finding by the ld. AO or that of the ld. CIT(A) that those parties are not regular customer of the assessee for the debtors and thereby amount given to debtors is not generated from the business. Not only that while recording the statement at the time of survey vide question no. 14 & 15 the assessee has specifically declared that source of the income disclosed is business income. This fact has not been rebutted, placing anything contrary on record.

The decision cited by the Id. DR in the case of Kim Pharma Private Limited (supra) in that case the assessee has not offered the income in the books of account and not offered for tax whereas in the case the facts are different and the assessee has offered the income and has accounted in the books of account. The second case of the relied in the case was Shiv Shakti Enterprises relates to invoking of 263 and therefore, it does not apply. The third decision in the case of Fakir Mohamad Haji Hasan relates to the chargeability of income under the head and not specifically dealt with the issue on hand. The case of Rajeev Jain is also invoking the provision of section 263 of the Act. Whereas the decision of Svetlan Gorodinskaia deals with the admitting the additional evidence to considered the income already considered and in the case of Rajesh Kumar the assessee has not made any explanation of the source whereas in the present case the assessee while surrendering the income vide question no. 14 & 15 specifically stated that the source is from the business income and the same has already been accepted by accepting the returned income. Hence, in view of the facts and circumstances of the case, we do not concur with the findings of the ld. CIT(A).

Ground no. 1 being technical and the appeal of the assessee is allowed considering the merits of the dispute we feel that this ground becomes academic at this stage. The ground no. 4 being consequential and 5 being general does not require our findings.

Thus, the appeal of the assessee is allowed as indicated hereinabove.

In the result, the appeal of the assessee is allowed.