TaxTMI 
TaxTMI 
2021 (11) TMI 405
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.... the circumstances of the case the Ld. CIT (Appeals) was not justified in allowing the assessee's appeal on the chargeability of tax as per normal rates instead of amended provisions of section 115BBE of the act applicable w.e.f. 01/04/2017 relevant to AY 2017-18 which are clearly attracted in the case of the assessee." 2. The first ground relates to addition of Rs. 14,07,74,148/- on account of excess stock found during the course of search. 3. The brief facts leading to the case is this that the assessee is engaged in trading and manufacturing business of gold and diamond jewellery. A search operation under Section 132 of the Act was carried out on 28.09.2016 at the business as well as residential premises of Anand & Punjab Group of Indore including the assessee along with other concerns/business associates wherein certain discrepancies in the quantity of closing stock were found. The assessee offered additional income of Rs. 10,10,00,000/- on account of the aforesaid difference in the quantity of stock found in the said search proceeding. Subsequently, another survey proceeding under Section 133A was carried out on the business premises of the assessee on 15.11.2016 which w....
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....erence in quantity valued by the Authorised Govt. approved valuer during the search and there is no dispute again on this issue on part of assessee. • After considering the quantitative difference in totality, the assessee itself has offered Rs. 10,10,00,000/- on account of excess stock found in jewellery business during the, course of search and valued by the Govt. approved Valuer on the basis of stock available at the premises on the date of search, which is not disputed, • The fact remained undisputed till the date of issuance of show cause Notice dated 31.10.2018 & 05.12.2018 whereas no reply was filed till 11.12.2018 • The assessee has now come forward with a plea that the valuation made by Govt. approved Valuer; is not correct on adopting the value of gold/ornaments in the valuation report, although there is no dispute over the quantity of the said report and is partly acceptable to assessee. • Now, the assessee pleaded that if the working is made on hypothetical figure taken in the valuation report on the quantity appearing in the books of account and there remains no difference and the surrender made by the assessee is exc....
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....see made in the written notes of submission submitted before us: "1.9] That if the valuation of book stock converted at the market price by taking the rate as applied by the DVO in that case the overall difference was of Rs. 2,78,25,512/- only whereas the respondent assessee had declared additional income of Rs. 10,14,95,122/-. The same is calculated as under:- Particulars Stock as per DVO valuation Book Stock as per DVO Rates Cl. Stock as on 31.03.2016 (As per Annex. 1) 855514351 1048141462 Add: Purchases between 01.04.2016 & 28.09.2016 516053030 516053030 Add: Making Charges between 01.04.20 1 6 & 28.09.2016 0 21321624 Less: Sales between 01. 04.2016 & 61 1767 28.09.2016 779 Less: GP as per Audit Report 5 87 90 for AY 2016-17 9.61% 884 1 371567381 55 29 76895 15855 16 116 55 29 76 895 Cl. Stock as on 28.09.2016 as per Books of A/C 818590486 1032539221 Physical Stock as per DVO Reports 1060364733 1060364733 Excess Stock -24 1774247 -27825512 Less: Stock Surrendered Short/ Excess Surrendered 101495122 -140279125 101495122 73669610 1.10] That if the books stock in ter....
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....uantity. The difference in the quantity was duly addressed by declaring additional income at the time of search. Hence there was no justification for adding the difference in the valuation of the Jewellery to the total income of the appellant. The Ld CIT(A) was rightly deleted the said addition." 7. The Ld. CIT(A) while allowing the appeal preferred by the assessee observed as follows:- "4.1.3 I have considered the factual matrix of the case, plea raised by the appellant and findings of the AO. Search u/s 132 of the IT Act was conducted at the business premises of the appellant on 25-09-2016. The appellant maintained day to day quantity records in GS-11 and GS-12. During the course of search, difference in the quantity as per GS-11 and GS-12 with the quantity as actually found during the course of search as per DVO report was duly accepted by the appellant and additional income to the tune of Rs, 10,10,00,0007- as per the rate adopted by the DVO on the date of search was surrendered. It is an undisputed fact that the difference in the quantity was duly reconciled and additional income on account of difference in quantity was duly surrendered by the appellant. The assess....
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.... during the course of search voluntarily accepted difference in the quantity of jewellery and offered additional income of Rs. 10,10,00,000/- [Correct amount of Rs. 10,14,95,122/-] for tax. After incorporating the quantity which was surrendered by the appellant, there was no difference in the quantity as per books of accounts and as actually found during the course of search. Thus, the appellant claimed that addition made by the assessing officer to the tune of Rs. 14,07,74,248/- was not justified. On perusal of the assessment order and after going through the submission of the appellant, I find strong force in the contention of the appellant that the amount added to the total income of the appellant was on account of difference in valuation of jewellery as per report of the DVO and cost of jewellery as shown in the books of the appellant. The said approach of the assessing officer was not correct more so when the appellant duly accepted additional income on account of difference in the quantity as per books of accounts and as actually found during the course of search as per report of the DVO. The appellant further demonstrated before the assessing officer and also in the appellat....
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....8.09.2016 as per Books of A/C 81 8590486 1 032539221 Physical Stock as per DVO Reports 1 06 03 64 733 1 060364733 Excess Stock -241774247 -27825512 Less: Stock Surrendered Short/ Excess Surrendered 10 1495 122 - 140279125 101495122 73669610 Thus, in view of the above discussion, if the rates adopted by the DVO are applied to opening stock the only difference which comes out is at Rs. 2,78,25,512/-, however, appellant has already made voluntary disclosure of Rs. 10,14,95,122/- during the course of search and survey. Therefore, the AO was not justified in making addition of Rs, 14,07,74,248/- on account of excess stock found during the course of search. Thus, the addition made by the AO amounting to Rs. 14,07,74,248/- is Deleted. Therefore, appeal on these ground is Allowed." 8. We have considered the judgment relied upon by the Ld. AR passed by the Hon'ble Delhi Bench in the case of Neha Jewellers Pvt. Ltd. vs. ACIT in ITA No. 3711/Del/2010. On the identical situation the Hon'ble Bench was pleased to observe as follows: "19. The Learned CIT(Appeals) after examining the facts of the case, held that the methodology adopted by the A....
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....ssessment proceedings, the Learned CIT(Appeals) has also called for the remand report from the Assessing Officer. In his remand report, the Assessing Officer has also not pointed out any specific error or defect in the computation of the excess stock. As regards the stock to be taken as on the date of the search as against taken by the Assessing Officer as on 01.04.2005, the explanation of the Assessing Officer in the remand report was that in view of the unaccounted sales and purchases, he was justified in taking the stock as on 01.04.2005. We are of the view that this contention of the Assessing Officer is not sustainable and this cannot be the reasoning for taking into consideration the stock as on 01.04.2005 as per books of account as against the stock as on the date of the search as per books of account. What is to be found out on the date of search is the stock as per books of account. While finding out the stock on the date of search i.e. on 09.12.2005, the purchases and sales made and recorded in the books of account during the period 01.04.2005 to 09.12.2005 have to be taken into consideration. 23. On having gone through the paper book, we note that the assessee h....
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....e difference as added to the total income of the appellant was on account of valuation of stock and not on the basis of difference in quantity of stock which is not the proper method and which rightly considered by the Ld. CIT(A) is also having substance. We further find that this is an undisputed fact of the case that the difference as proposed is on account of valuation only and there is no difference in quantity. The difference in quantity has duly been addressed by declaring additional income at the time of search. 10. Thus, considering the entire aspect of the matter we find no justification for addition in the difference the valuation of the jewellery to the total income of the appellant. The addition made by the Ld. AO on account of excess stock found during the course of search those cannot be set to be justified in view of the observation made hereinabove and, thus, the deletion of addition made by the Ld. CIT(A) is according to us is just and proper so as to warrant interference. Hence, the grounds of appeal preferred by Revenue is found to be devoid of any merit and, thus, dismissed. Ground No.2:- 11. Allowing the appeal on the chargeability of tax as per nor....
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.... (i). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance [or set off of any loss] shall be allowed to the respondent assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).]" After the amendment total income includes additional income as voluntarily declared by the appellant in the return of total income whereas the amount of addition made by the AO included both the amount, and the provision of Section 115BBE of the Income Tax Act was applied. Therefore, the assessee made out the following case against the order passed by the Ld. AO: "2.2.5] That provision of section 68, 69, 69A, 69B, 69C and 69D of the Income Tax Act is attracted when the additional income as offered or amount as added attract the provision of sections 68, 69, 69A, 69B, 69C and 69D of the Income Tax Act. The present case in hand, the assessing officer made addition to the total income of the respondent assessee by invoking the provision of section 69B of the Income Tax Act "69B. Where in any financial year the respondent assessee has made investments or is found to be the o....
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....02,793/- on account of discrepancies in Stock. In addition to that the Ld. A.O. also added Rs. 14,07,74,248/- on account of excess valuation of closing stock in value terms only. 2.5.1] That while filing the return the respondent assessee company included the surrender amount of Rs. 11,34,97,915/- under the head "Business Income" and paid tax at applicable normal rate of 34.60%. 2.5.2] The Assessing Officer treating the difference in stock as "Unexplained Investment" and covered the same under deeming provisions of section 69B of the Income tax and after applying the provisions of section 115BBE tax @ 77.25% . 2.5.3] That the issue in this ground is that under which head excess stock found in the Search & Survey is to be taxed ,whether under the head income from business or treated as unexplained investment by applying deeming provisions of section 69B of the Act. 2.5.4] That during the course of Search Proceedings vis-a-vis assessment proceedings the respondent assessee has explained before the Ld. A.O. that surrender of Excess Stock was in relation to business activities and it had direct nexus with business activities, accordingly the responde....
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....ering the submission made and decisions referred, it is undisputed that the appellant is having only source of income from Trading and Manufacturing of jewellery. The additional income was offered on account of difference in the stock as per books of accounts and as actually found during the course of search. The difference in stock as fund was also related to the business of the appellant. I therefore hold that additional income offered and addition made was on account of business income of the appellant and is therefore liable to be taxed under the head of income from business and profession only. The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68, 69, 69A, 69B, 69C and 69D i.e. from residuary category w.e.f 01.04.2017. However, in the present case in hand, additional income was offered and even addition was made on account of difference in the stock which was liable to be taxed under the head of income from business and profession only and valuation of stock was done on the basis of various observations drawn during the course of search & survey which took place on 28.09.2016 & 15.11.2016 respectively. Since, the search ....