TaxTMI 
TaxTMI 
2020 (12) TMI 16
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....e total income of Rs. 7,88,88,920/- and applied Normal tax rates in respect of excess stock found during the course of search instead of applying section 115BBE of the Act. The Ld.Pr.CIT is of the view that taxing the income @30% on the additional income representing the unexplained investment in stock required to be brought to tax u/s 115BBE and to be levied @60% instead of 30%. Therefore, the Ld.Pr.CIT viewed that the assessment order passed by the AO, taxing the income @30% instead of 60% is erroneous and prejudicial to the interest of the revenue and issued show cause notice to the assessee calling for explanation. 2.1. The assessee filed explanation before the Ld.Pr.CIT stating that there was no difference in stock, hence, the disclosure made by the assessee was voluntary. The excess income admitted was only with an intention to end the protracted litigation and prolonged arguments. The assessee did not protest during the course of assessment proceedings, because, there was no dispute with regard to admission of income under the business head. The assessee further submitted before the Ld.Pr.CIT that it was mixed stock consisting of different varieties and not identified ....
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.... of search which is reproduced hereunder: "Q.52) Do you have anything to say? Ans: I am aware of the above deposition and also,-having regard to the mistakes, commissions and omissions I would like to come forward to declare an income of Rs. 1500 lakhs (Fifteen hundred Iakhs) as undisclosed income for the last six years including up to the date of search and covering the issues that raised in the above deposition in the hands of our group individuals and business entities. The exact year wise breakup and the hands in which that is to be declared will be submitted before your good self before 10 days after going through the material seized at various premises belonging to our group. The above declaration of Rs. 15 crore made by me is after consulting other directors/partners and family members. I volunteer to declare the said amount of Rs. 15.00 crore is over and above my regular income. In the normal course of business and also the said income will not be set off against any losses of any of our business concerns. As I am voluntarily declaring the additional income of Rs. 15 crore I request you not to impose any penalties and not to initiate any ....
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....le in the assessee's case. The Ld.AR further argued that as per the questionnaire issued by the AO and the reply submitted by the assessee to the AO, it is clear that the AO has verified the issue in detail and taken a conscious decision to tax the income as business income, but not the income u/s 69 of the Act. Referring to assessment order passed by the AO, the Ld.AR brought to our notice that the AO has not made any addition u/s 69 of the Act. Thus argued that once the AO is satisfied that the income representing excess stock required to be brought to tax as business income, the same cannot be reviewed by the Pr.CIT and tax the same as income u/s 69 and invoke the provisions of section 115BBE of the Act. Thus, argued that there is no case for revision u/s 263 on difference of opinion. The Ld.AR relied on the decision of Hon'ble Jurisdictional High Court in Spectra Shares and Scrips (P) Limited Vs. Commissioner of Income Tax - III, Hyderabad [2013] 36 Taxmann.com 348, wherein the Hon'ble High Court held that merely because the Pr.CIT has different opinion in the matter he cannot invoke his powers u/s 263 of the Act. The Ld.AR also relied on the decision of this Tribunal in the ca....
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....ntioned in the explanation submitted before the AO and argued that the excess stock represents business income. He supported his argument placing reliance on M/s Chokshi Hiralal Manganlal Vs. DCIT 45 SOT 349. Taking our attention to paper book2, page No.13, the Ld.AR submitted that the AO has called for explanation by show cause notice as to why the amount of Rs. 4,41,46,445/- should not be treated as undisclosed investment u/s 69 of the Act by applying provisions of section 115BBE of the Act for which the assessee filed explanation before the AO. In his explanation, the assessee supported his argument that excess stock found during the course of survey or search required to be brought to tax as business income under the head "profits and gains of business", but not as unexplained investment u/s 69 of the Act. The assessee also relied on various decisions of Tribunal supporting his argument. For the sake of clarity and convenience, we extract relevant part of the explanation offered by the assessee vide letter dated 20.12.2018 in page No.19 to 22 which reads as under : "We would like to submit that we have given detailed explanation vide the third referred letter explai....
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....re was no necessity for assessee to credit the profit and loss account and offer the same to tax. Accordingly, we do not see any infirmity in Assessee's bringing such transaction in its books of accounts. 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 food grains, 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 Hon'ble ITAT' Bench has relied on the decision in the case of Shri Ram Narayan Bir-la dated 30.092016. In that case, the question before the coordinate bench was whether the CIT(A)-2, Udaipur has erred in directing to assess the unexplained income surrendered by the assessee under the head " Income from Business". The Bench has held that the excess stock was part of the stock, and therefore, the same wa....
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....e. Relying on the facts of this case and the principles as laid down in the above cases which equally apply to the facts, Assessee has correctly treated the above income as 'income from business' and accordingly provisions of Section 115BBE are not applicable, as proposed by the Assessing Officer. Without prejudice to the above, it is submitted that provisions of Section 115BBE are not applicable as the rate of 60 per cent was brought on statue by the Taxation Laws(-Second Amendment) Act 2016 (by way of ordinance in December, 2016), whereas the search has occurred in September, 2016 in winch excess stock was found It is a settled proposition of law that any amendment which increases the tax burden of the assessee, has to be considered prospective and not retrospective The cause of action arose in September, 2016 and the law at the point of time was to tax such incomes only at 30 per cent tax rate under Section 1 153BE In the case of CIT vs Vatika Township Private Limited (367 FIR 466), the Hon'ble Supreme Court at para No.32 & 33 held that legislation which modify accrued rights or which impose obligations or impose new duties or attach a new disability ha....
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.... "59.......... The contention of the Revenue that the Assessing Officer had not applied his mind to the material on record cannot be accepted because the respondent in his order dated 31.03.2011 specifically records a finding at Para 5.1 that there is application of mind by the Assessing Officer. The Revenue cannot raise a plea which is not contained in the order of the respondent and is contrary to it and to the record. The contention of the Revenue that there are no reasons given by the Assessing Officer about the nature of activity of the assessee cannot be accepted because a query was raised by him in the course of the assessment proceedings and was replied by the assessee. Obviously, he was satisfied with the explanation of the assessee and therefore did not think that the issue needs to be specifically mentioned. It is settled law that the Assessing Officer in the assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry, the respondent, merely because he entertains a different opinion in the matter, cannot invoke his powers u/s. 263 of the Act. It is therefore not correct to say that there....