TaxTMI 
TaxTMI 
2022 (1) TMI 683
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....income. 2.On the facts and in the circumstances of the case, the ld. CIT(A) erred in not appreciating that the tangible excess stock found during the course of search has to be considered as unexplained investment u/s 69 of the Income Tax Act 1961 and not a normal business income. 3.On the facts and in the circumstances of the case, the ld. CIT(A) erred in holding that the amended provisions of section 115BBE are not applicable in the assessee's case since the search was conducted on 15.12.2016 without appreciating that the provisions of section 115BBE are effective from 01.042017 i.e. for the entire A.Y.2017-18 and that the date of search has not relevance in deciding the applicability of the said section. 2. Brief fact of the case as culled out from the records are that the assessee is an individual. The only source of income of the assessee is from carrying out the business of manufacturing and trading of gold jewelleries under proprietorship concern named 'M/s. A.P. Jewellers'. A Search action u/s. 132 of the Income-Tax Act, 1961 [in short, 'the Act'] was conducted in the business as well as residential premises of the assessee, on 15-12-2016, at 6:00 A.M......
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....ies carried out by the assessee. Accordingly, the ld. CIT(A) allowed the appeal of the assessee and directed the AO to treat the sum of Rs. 1,41,75,568/- as normal business income of the assessee and apply normal tax rate. 4. Aggrieved Revenue is now in appeal before this Tribunal. 5. Ld. DR vehemently argued supporting the order of Ld. AO initiated that the income of the assessee should be taxed as per the provisions of section 115BBE of the Act. 6. Per contra, Ld. counsel for the assessee vehemently argued referring to following written submissions and settled judicial precedence: DEPARTMENTAL GROUND NOs. 1 to 3 Your Honours, the subject issue of taxability of excess physical stock of Rs. 1,41,75,568/-, found during the search, at the normal rate of tax instead of the special tax rate under s.115BBE, can be understood on three counts: i) Section 69 could not be invoked if 3 conditions not fulfilled cumulatively ii) The sources of the excess physical stock duly explained - does not fall within the ambit of unexplained investment u/s. 69 iii) The amended provisions of section 115BBE in respect of higher tax rate would not apply ....
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....1) on page no. 4 & 5 of the impugned Order. 3.4 Such explanation of the assessee, as made before the search party, remained unrebutted by the search party during the course of the postsearch investigations and even by the AO during the course of the assessment proceedings. 4.0 Thus, s.69 could not have been invoked in the case of the assessee as the mandatory cumulative conditions for invoking such provisions had not got fulfilled. If s.69 itself cannot be invoked, the provisions of s.115BBE cannot be put into motion. ii) THE SOURCES OF THE EXCESS PHYSICAL STOCK DULY EXPLAINED - DOES NOT FALL WITHIN THE AMBIT OF UNEXPLAINED INVESTMENT U/S. 69 5.1 Undisputedly, an explanation was made by the assessee before the search party as regard to the nature and source of investment in excess physical stock. 5.2 The excess stock got generated to the assessee in the ordinary course of carrying out his business of manufacturing and trading of gold items and gold ornaments. 5.3 As regard to the modus operandi of the business resulting into such excess stock, it is submitted that while raising the sales invoice to any customer, the selling pric....
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....eld that an additional levy of tax cannot be imposed upon an assessee with the retrospective effect. 6.4 Your Honours, recently, the Hon'ble Jurisdictional ITAT Bench at Indore, in the case of DCIT, Central-2, Indore vs. M/s. Punjab Retail Pvt. Ltd. 2021 (11) TMI 405 (ITAT Indore), vide its Order dated 08-10-2021, has held that since the search in the case of the assessee was carried out before the amendment, the addition ought to have been made in terms of the prevailing provision and therefore, the addition made by the AO invoking the provisions of s.115BBE which came into force only on 01.04.2017, is not sustainable. Legal Authorities on which Assessee wish to rely S. No. Particulars of Case Citation Ruling 1 WHEN THE ASSESSEE EXPLAINED THE SOURCES, NO ADDITION CAN BE MADE U/s. 69, 69A, 69C ETC. i) Pipush Kumar O. Desai vs. CIT (2001) 247 ITR 568 (Guj.) Guj.HC ii) Daulatram Rawatmull vs. CIT (1967) 64 ITR 593(Cal.) Cal.HC iii) Annamalai Reddier vs. CIT (1964) 53 ITR 601 (Ker) Ker.HC iv) CIT vs Margret's Hope Tea Co. Ltd. (1993) 201 ITR 747 (Cal.) Cal.HC &n....
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....taxmann.com 62 (Guj.) Guj.HC ix) Shew BhagwanGoenka Vs CTO 1973 32 STC 368 Cal.HC x) Priyadarshani Construction vs. ITO (2012) 19 ITJ 276 (Trib.- Indore) ITAT Indore) 4 AMENDED PROVISIONS OF S.115BBE CANNOT BE APPLIED RETROSPECTIVELY i) DCIT, Central-2, Indore vs. M/s. Punjab Retail Pvt. Ltd. 2021 (11) TMI 405 (ITAT Indore) ITAT Indore ii) Lovish Singhal & Ors. vs. ITO & Ors. (2018) 53 CCH 250 (JodhTrib.) Jodhpur ITAT 7. We have heard rival contentions and perused the records placed before us. Revenue's sole grievance is that Ld. CIT(A) erred in not treating the income of Rs. 1,41,75,568/- declared during the course of search carried out on 15.12.2016 as unexplained investment u/s 69 r.w.r.t. 115BBE of the Act. We notice that during the course of search excess stock of gold weighing 6433.812 gms was found amounting to Rs. 1,41,75,568/-. Mr. Anoop Neema in his statement recorded on oath on 16.12.2016 u/s 132(4) of the Act accepted the value of excess stock as additional business income for financial year 2016-17. So far as, admission of undisclosed income of Rs. 1,....
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....cquisition of excess stock, therefore, the disallowance made by the AO u/s 69 r.w.s 115BBE is unlawful. Further, the amended provisions of section 115BBE are applicable from 01.04.2017 and not from the date of search. 4.1.2 I have considered the entire matrix of the case, various case law cited by the appellant and also perused assessment order. It is undisputed fact that during the course of search excess stock of gold worth Rs. 1,41,75,568/- was found in possession of appellant. Therefore, appellant during search made disclosure of 1,41,75,568/- on account of undisclosed income, however, the appellant while filing return of income has directly credited the same in his capital account and without showing the same as additional income. Therefore, the additional income offered was not shown in profit and loss account. Thus, the AO was justified in making addition on account of undisclosed income declared in statement recorded on oath u/s 132(4) during search. Also, the appellant has accepted the addition made by the AO amounting to Rs. 1,41,75,568/- vide written submissions dated 26.07.2019. However, the appellant has objected to the findings of the AO on treating the addit....
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....in the relevant pervious year. Thus, condition (iii) or (iv) has not been invoked by the appellant, therefore, addition u/s 69 alone of this fact is untenable as held by Hon'ble Jurisdictional ITAT, Indore Bench in the case of Mukesh Sangla HUF vs. DCIT (2016) 27 ITJ 172 (Trib.-Indore). Nonetheless, neither the search party during course of search nor the AO during assessment proceeding found that appellant has been doing business other than manufacturing and trading of gold ornaments or has any other undisclosed source of income. Further the excess stock found in possession of the appellant was not kept separately and was not easily identifiable. The excess stock was part of the mixed lots of stock found at the premises of the appellant which included declared stock as per books of account and also the excess stock as found during the search. Since the excess stock in possession was not clearly identifiable or was not kept at a secret place, therefore, it can be safely held that the same could have been earned/accumulated over the time. However, this presumption of accumulating over a period of time is ruled out with simple stroke of statement of appellant wherein he has ....
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....r:- 4.3. We have heard rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver jewellery. The Coordinate Bench in the case of Chokshi Hiralal Maganlal vs. DCIT, 131 TTJ (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt ....
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....er 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 existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 14. To conclude sum of Rs. 8,10,011/- being difference in stock is represented by 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 ....
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.... ld. AR and also the decision of Hon'ble Rajasthan high court in the case of Bajrang Traders in Income Tax Appeal No. 258/2017 dated 12/09/2017 I observe that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head 'business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act. Thus, there is no justification for taxing such income U/s 115BBE of the Act. (f) ACIT Vs. Sanjay Bairathi Gems Ltd - 189 TTJ 487/492 (Jp). In this case, it is held as under:- From the above, it is seen that the excess stock found during the search operation is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the author....
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....riman Point, Mumbai - 400021. These documents mention the carat value, rate per carat and total value of diamonds. In the course of search proceedings Shri Vipul Shah confirmed that these loose papers were containing stock details of M/s A'Star Exports, M/s. Asian Star Diamond International P. Ltd. and M/s. Rahil Agencies. The stock mentioned in the above referred seized papers was stated as placed in one safe located at the office premises. The stock of diamonds found from the safe was valued by the Govt. Approved valuer appointed by the Income Tax Department at the time of prohibitory order execution and was valued as follows: The statement of Shri Vipul Shah was again recorded on 27/12/2010, wherein he admitted the unaccounted stock of 34,50,00,516/- including unaccounted stock of 13,47,63,640/- pertain to the assessee. The computation of the total income of the assessee had declared undisclosed income of 13,47,63,640/- in the form of stock of polished diamonds under the head "profit and gains of the business and profession". In the course of assessment the assessee submitted .its explanation on why the undisclosed stock should be treated as a business income. In th....
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....99 TTJ 197 (ITAT Rajkot). (l) M/s Dev Raj Hi Tech Machines vs DCIT ITA No 326 of 2014 dated 07.10.2015 (ITAT Amritsar) (a)(ii) From the above discussion and in view of the plethora of judgments on this settled issue, I am of the considered view that section 69 was clearly not applicable in the case of appellant and the suppressed income found by way of excess stock was business income of the appellant and cannot be treated as unexplained investment u/s 69A of the IT Act. (b) Applicability of amended provisions of section 115BBE of the Act:- During the course of search excess stock of gold was found amounting to Rs. 1,41,75,568/-. The appellant made voluntary declaration of additional income and the same has been taken into consideration in regular return of income. Till this point there is not dispute. The issue creating dispute is that the additional income disclosed by appellant (during search) has been incorporated in books of accounts as business income, however, the AO has treated the same as unexplained investment u/s 69 of the Act and made subsequent addition in the income of appellant by applying tax rate as per amended provisions of sect....
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....e case of Priyadharshani Construction vs ITO (2012) 19 ITJ 276 (Trib-Indore) has held that "Substantive law shall be understood to be applicable prospectively unless made specifically retrospective. Similar view was taken in following judgments by various courts and tribunals:- * Hon'ble Rajasthan High Court in the case of CIT vs Bajargan Traders [Appeal No 258/ 2017 dt 12-09-2017]; * Hon'ble Ahmedabad bench of ITAT in the case of Chokshi Hiralal Maganlal vs DCIT as reported in 141 TTJ 001; * Hon'ble Jodhpur bench of ITAT in the case of Lovish Singhal & Others vs ITO [Appeal No 143/ Jodh/ 2018]; * Hon'ble Jaipur bench of ITAT in the case of DCIT vs Ramnarayan Borla [Appeal No 482/ JP/ 2015 dt 30-09-2016]; * Hon'ble Supreme Court in the case of Lakhmichand Baijnath Vs CIT as reported in 35 ITR 416; * Hon'ble Apex Court in the case of Nalini Kant Ambalal Mody vs SAL Narayan Row as reported in 61 ITR 428. In the instant case search u/s 132 of the Act took place on 15.12.2016. Since, the search in the case of appellant was carried out on 15.12.2016 and additions were made consequential to search, therefore, the assessing of....