TaxTMI 
TaxTMI 
2022 (1) TMI 683
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.... 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.. During the course of search physical stock of jewelleries weighing ....
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....he 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 retrospectively The aforesaid three issues are discussed as under: i) SECTION 69 COULD NOT BE INVOKED IF 3 ....
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.... 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 price of the gold ornaments depends upon the internationally prevailing price of the bullion on any particular date and as also, on the purity of the gold ornaments. More the purity of the gold, say of 22 carats or 23 ca....
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....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 v) Chandra Krishna vs. CIT (1980) 122 ITR 823 (All.) All.HC vi) Mukesh Sangla HUF vs. DCIT (2016) 27 ITJ 172 (Trib.-Indore) ITAT Indore 2 WHEN THE ASSESSEE HAS NOT CARRIED OUT ANY OTHER BUSINESS FOREIGN TO HIS MAIN BUSINESS, TH....
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....(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. 1,41,75,569/- is concerned there is no dispute at the end of both the parties. The bone of contention is that whether the provision of section 115BBE of the Act are applicable on the surrendered income of Rs. 1,41,75,568/- we find that Ld. CIT(A) on examination of the fact, settled judicial precedence, also appreciating that the alleged income is business income earned by the assessee during the normal course of its business and was part of the total business stock available at the business premises and....
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....ch 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 additional income offered (or say business income) by the appellant as unexplained investment u/s 69 r.w.s 115BBE of the Act. After considering the plea of appellant interalia facts of the case it can be easily said that the instant case revolves around applicability of two different sections i.e. section 69A and section 115BBE of the IT Act. (a) Applicability of provisions of section 69A (unexplained investment) of the Act:- The AO found appellant of guilty of invoking provisions of section 69 of the Act and has re-classi....
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....ss 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 admitted that the same has been earned in FY 2016-17(AY 2017-18). Further, the appellant does not have any income other than manufacturing and trading of gold ornaments, therefore, the excess stock found during search was earned out of business income by the appellant. Hon'ble Ahmadabad ITAT in the case of Chokshi Hiralal Maganlal vs DCIT, (ITA No 3281/Ahd/2009 dated 05.08.2011) has held that "the provisions of section 69A/69B of the IT Act can only be applied the case where the asset is separately applicable and separately identifiable and it should have ....
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....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 of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off ....
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....endently. 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 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. (d) Chokshi Hiralal Maganlal Vs. DCIT, Ahemadabad (ITA No. 3281/Ahd/2009 dated 05.08.2011) In this case, it is held as under:- 9. Since in the present case excess stock found during the survey is not separately and c....
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....er 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 authorized officers during the search operation at the premise. Since excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in the excess stock has to be treated as business income. Further, the excess stock so found is part of the regular business, therefore, following decision of Hon'ble Tribunal Bench Jaipur in case of Ramnarayan Birla (cited supra), the same has to be taxed under the business income. Otherwise even if the same is taxed under s. 115BBE of the Act, the provisions of not allowing the set off has come into effec....
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....gain 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 this connection it was stated that at the time of search, the investigating officers found unaccounted stock in the business premise of the assessee at 114/116, Mittal Court, 'C' Wing, 11th Floor, Nariman Point, Mumbai - 400021. This stock was valued at 13,47,63,640/- by the income tax valuer. Consequently the assessee declared this amount as stock in trade and this contention of the assessee was accepted by the Investigating officer. Who has released the stock after valuation and not impounded/seized. The statement of Shri Vipul P. Shah Partner of the firm was again recorded on 20.11.2012 wherein in reply to the question no. 22 he has stated that this undisclosed income is....
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....s 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 section 115BBE of the Act. First of all let me discuss whether the provisions of section 115BBE are applicable to this case or not. Therefore the relevant extract of pre-amended and post amended provisions of section 115BBE is reproduced for the sake of clarity:- Pre amended provisiosn of section 115BBE of the Act:- "115BBE(1). Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of- (a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b) the amount of income-tax with whi....