TaxTMI 
TaxTMI 
2011 (1) TMI 125
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....ncome by way of excess stock was not assessable under the head "profits and gains of business or profession". (2.3) The ld. CIT(A) has erred in relying upon the decision of Fakir Mohd. Haji Hasan (supra), though it was distinguishable both on facts and in law. (3.1) The ld. CIT(A) has erred in law and/or on facts in upholding that the deduction u/s 40(b) of the Act was not admissible in respect of income declared towards the excess stock. (3.2) That in the facts and circumstances of the case as well as law, the ld. CIT(A) ought to not to have upheld the disallowance of partners remuneration in respect of income declared towards excess stock. (4.1) The ld. CIT(A) has grievously erred in law and/or on facts in confirming the addition of Rs. 1,05,000 made by AO as unexplained cash credits. (4.2) That in the facts and circumstances of the case, the ld. CIT(A) ought not to have upheld that cash credit of Rs. 1,05,000 was unexplained. (4.3) The ld. CIT(A) has failed to appreciate that the appellant has discharged the burden cast upon it to prove the impugned cash credits and the appellant was not called upon to produce any of the cred....
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....emuneration paid to partners Rs. 19,50,131 Rs. 11,78,583 Add: Unexplained cash credit Rs. 1,05,000 Add: Under valuation on account of stock of silver as discussed above Rs. 1,53,252 Add: On account of telephone & petrol expenses & depreciation Rs. 35,223 Rs. 14,72,058 Add: Addition made u/s 69B being amount of investment not disclosed in the books of account as mentioned above Rs. 35,70,518 Total income Rs. 50,42,576 Rounded off Rs. 50,42,580 4. The ld. CIT(A) confirmed the order of the AO holding that excess stock should be added separately and, therefore, remuneration payable to the partners should be consequently restricted in accordance with section 40(b). 5. Before us the ld. AR for the assessee submitted that excess stock so found and disclosed by the assessee is business income and should not be assessed separately under section 69B. He referred to the decision of the Tribunal Ahmedabad Bench 'B' in the case of M/s Fashion World v. ACIT in ITA No. 1634/Ahd/2006 Asst. Year 2002-03 pronounced on 12.2.2010. It is held therein that if excess stock fo....
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....rom that judgment as under :- "In relation to the addition made and sustained by the Tribunal under section 69C of the Act, it was contended that the case of the Revenue was only under the provisions of section 69B of the Act and there was no question of any unexplained expenditure having been incurred which was to be added back. The Tribunal had failed to appreciate the basis of the addition made by the Assessing Officer and thus had wrongly converted the said basis by invoking and applying the provisions of section 69C of the Act. In support of the submission made, reliance was placed on the decision of this court as reported in case of Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290, to submit that any addition made under the provisions of sections 69, 69A, 69B and 69C of the Act would not permit the corresponding deduction under any other provisions of the Act as the said group of sections dealing with deemed income do not fall under any of the heads of income enumerated in section 14 of the Act. According to the learned counsel, therefore, the Tribunal had erred in granting corresponding deduction of Rs. 12,80,00,000.." 6. Relying on above submissions the ld. AR ....
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..... what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the assessee and sought to tax the difference between book-stock and physical-stock as unaccounted investment under section 69 without considering the claim of the assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existe....
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....undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only. 15. In view of the above, AO is directed to consider the sum of Rs. 8,10,011 as undisclosed business income assessable under the head 'business' and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO." So far as the decision of Hon'ble Gujarat High Court in DCIT v. Radhe Developers India Ltd. (supra) referred to by the ld. AR is concerned it relates to claim of deduction for expenses against unexplained investment. It has not laid down the law that unexplained investment in an asset found during the course of search/survey cannot be taxed under sections 69A, 69B & 69C. If the arguments of the ld. AR is accepted that any unexplained income of t....
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....he next issue is about cash credit of Rs. 1,05,000. During the course of assessment proceedings the AO found that the assessee has advanced a sum of Rs. 1,65,000 to various persons. The AO required the assessee to submit the details of the transactions as under:- i. What is the mode of the payment? ii. What is the source of above payment-produce necessary evidence? Please state your annual income. iii. If books are maintained the same may be produced together with bank pass book. iv. If assessed to tax -the designation of the AO as well state PAN No. v. Whether the above amount is received back state the date and mode of receipt. The AO, however found that letters were received unserved in the following cases :- 1. Padmaben Bharatkumar Thakkar. 2. Radheshyam Panchal. 3. Shardaben Vasudevbhai. 4. Niruben Radheshyam Soni. 5. Yamnaji Punjaji Soni. 6. Tulsiji Yamnaji Soni. 7. Gopalji Lalji Soni. Since the assessee was not able to further clarify, the AO treated the sum in respect of above persons as cash credit and added the sum of Rs. 1,05,000 in the total income. 11. T....