2023 (10) TMI 194 - AT - Income Tax

Tribunal sets aside Commissioner's order, directs Assessing Officer to assess excess stock under income from business

The Tribunal allowed the appeal, setting aside the Commissioner of Income Tax (Appeals)-18's order. It directed the Assessing Officer to assess the excess ... Excess stock found during the course of survey - Additions u/s. 69B r.w.s. 115BBE - additional income offered towards excess stock found during the course of survey - Appellant offered explanation with regard to excess stock found during the course of survey and claimed that said excess stock is on account of numerous items of physical stock carried by the assessee including old jewellery received from customers for repair and polish and also exchange and further said excess stock has been acquired out of business income generated for the impugned assessment year - HELD THAT:- As following the decision of ITAT, Chennai Benches in the case of M/s. Mookambika Impex [2023 (7) TMI 1159 - ITAT CHENNAI] we are of the considered view that the additional income offered towards excess stock found during the course of survey is assessable under the head income from business as claimed by the assessee, but not income assessable u/s. 69B of the Act, as assessed by the Assessing Officer. Thus, we set aside the order of the CIT(A) and direct the Assessing Officer to assess income towards excess stock under the head income from business as declared by the assessee. Decided in favour of assessee. Issues Involved:1. Legality of the assessment order by the Commissioner of Income Tax (Appeals)-18.2. Classification of excess stock found during the survey as unexplained investment under section 69B read with section 115BBE of the Income Tax Act.3. Satisfaction of conditions for invoking section 69B of the Income Tax Act.4. Treatment of excess stock as part of business income or unexplained investment.5. Applicability of judicial precedents to the case.Summary of Judgment:Issue 1: Legality of the Assessment OrderThe assessee contested the legality of the assessment order passed by the Commissioner of Income Tax (Appeals)-18, Chennai, arguing that it was wrong, illegal, and opposed to law.Issue 2: Classification of Excess StockThe Commissioner of Income Tax (Appeals)-18 classified the excess stock found during the survey as unexplained investment under section 69B read with section 115BBE of the Income Tax Act. The assessee argued that the excess stock was part of the business income and should not be classified as unexplained investment.Issue 3: Conditions for Invoking Section 69BThe assessee contended that the conditions for invoking section 69B, which require that the excess stock is not recorded in the books and no satisfactory explanation is offered, were not met. The assessee provided an explanation that the excess stock was generated from business income, which was not refuted by the revenue.Issue 4: Treatment of Excess StockThe Tribunal held that the excess stock found during the survey was mixed with regular business stock and was acquired out of business income. Therefore, it should be assessed under the head 'income from business' and not as unexplained investment under section 69B. The Tribunal emphasized that the explanation provided by the assessee was plausible and reasonable.Issue 5: Applicability of Judicial PrecedentsThe Tribunal considered various judicial precedents, including the decision of the Hon'ble Madras High Court in the case of SVS Oil Mills vs ACIT and the Hon'ble Rajasthan High Court in the case of CIT vs Bajargan Traders. The Tribunal concluded that the decision of the jurisdictional High Court (Madras High Court) in the case of SVS Oil Mills was distinguishable on facts and not applicable to the present case. Instead, it followed the decision of the Rajasthan High Court and other ITAT decisions, which supported the assessee's claim that the excess stock should be treated as business income.Conclusion:The Tribunal allowed the appeal filed by the assessee, setting aside the order of the Commissioner of Income Tax (Appeals)-18 and directing the Assessing Officer to assess the additional income offered towards excess stock under the head 'income from business' as declared by the assessee. The judgment emphasized the importance of considering the explanation provided by the assessee and the need to follow the jurisdictional High Court's decisions when conflicting views exist.