Unrecorded trading stock treated as undisclosed business income, not separate deemed investment, where no independent identity was shown.

Excess stock found during survey, where it had no separate physical identity from accounted trading stock and formed part of the same business inventory, was to be characterised as undisclosed business income rather than unexplained investment under section 69B. The reasoning was that inseparable unrecorded stock in the regular course of business is properly taxed as business receipt or income, not as a distinct deemed investment. On those facts, the stock difference was rightly assessed as undisclosed business income.

---

---

Issues: Whether excess stock found in survey, having no separate physical identity from the accounted stock, was to be assessed as deemed income under section 69B or as undisclosed business income.

Analysis: The excess stock was found at the assessee's business premises in the same line of business and was not shown to have an independent physical identity distinct from the declared stock. Where the unrecorded stock is an integral and inseparable part of the trading stock, the proper approach is to treat the difference as business receipt/income rather than as a separately identifiable unexplained investment. On those facts, the deeming provision applicable to unexplained investments was not the proper first characterization.

Conclusion: The excess stock was rightly treated as undisclosed business income and not as separate deemed income under section 69B.

---