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2023 (7) TMI 733
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....e G.P. etc. When the figure of alleged excess stock is itself worked out from assumptions how can it be concluded that appellant has unexplained investment which is a definite term. Applying provisions of Section 69B on estimated figure is illegal and wrong. The same therefore may very kindly be deleted. 3. That the learned CIT(A) erred in confirming the view of the AO of applying provisions of Section 115BBE on business income without even considering the purpose of legislature behind introducing the provisions of Section 115BBE. The action taken by learned CIT(A) of confirming the addition made by AO is illegal and wrong. The same therefore may very kindly be deleted. 4. That the learned CIT(A) erred in confirming the view of the AO that the alleged excess stock is covered u/s 69B and not under the head business income. When the appellant is engaged only in business activity and the stock found is of the same items which appellant manufactures/trades, how can the same be treated as unexplained investment. That section 69B casts heavy burden on the shoulders of the AO. He has not only to conclusively find that there is some unexplained investment done by the appe....
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.... activity of the assessee company. Thereafter, the assessee has carried out the relevant entries in its books of accounts of the amount of stock surrendered under the head purchases and corresponding entries for crediting the stock. The assessee has specifically shown this income under the head extra ordinary items. The excess stock found during the course of survey is the same as finished goods manufactured by the assessee and deal in the same stock therefore, the excess stock will be treated as business stock of the assessee. This excess stock does not have any independent identity but it is integral and inseparable part of declared asset therefore, the difference can be treated as undeclared business income which has been offered by the assessee in the return of income for invoking provisions of section 69B of the Act there should be clearly identifiable asset separate from the other business asset of the assesse. If there is no physical distinction between accounted stock and unaccounted stock, the unaccounted stock will be treated as undeclared business income. Further in the statement recorded during the course of survey specific query was asked about source of income and ass....
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....has relied upon the orders of the authorities below. 5. We have considered the rival submission as well as relevant material on record. The dispute before us is only regarding applicability of the provision of section 69B and consequential higher rate of tax u/s 115BBE of the Act in respect of the income surrendered and offered to tax by the assessee on account of excess stock found during the survey. The assessee has declared the income as business income in the return income which was treated by the AO as deemed income u/s 69B of the Act. The AO has made the addition in para 4.2.3 to 4.3 as under: "4.2.3 Disclosure by assessee as business income is not of any help unless the same is supported by necessary evidences to establish the same as such. Since documentary evidences in respect of excess stock found and source of investment in excess stock remain unexplained, deeming fiction of 698 applies. Plea of the assessee that he has no other source of income is also not found tenable unless corroborative evidences are produced by the assessee to establish the same as income from business transactions for the year under consideration. 4.2.4 Even if the assessee of....
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....nor the income from other sources. 4.3 In view of the above, contentions of the assessee are not found tenable and therefore, amount of Rs. 58,78,145/- in form of excess stock, Rs. 52,86,831/-in form of sales and not recorded in its regular books of accounts and without supporting documentary evidences as detected at the time of survey u/s 133A is treated as deemed income u/s 69B/69A of the I.T.Act, 1961 and to be taxed as per provisions of secretion 115BBE of the I.T.Act, 1961. Penalty proceeding u/s 271AAC is also initiated separately. 6. The AO has applied the provision of section 69B of the Act for want of any supporting evidence regarding source of excess stock and nature of income which was not found recorded in the books of account at the time of survey. On appeal the Ld. CIT(A) has confirmed the order of the AO on the similar reasoning by relying the judgment Hon'ble Madras High Court in the case of M/s. SVS Oil Mills vs. ACIT in Income Tax Appeal No.765 of 2018. It is pertinent to note that during the course of survey what was detected in respect of the stock was that the physical stock found at the business premises of the assessee was excess in comparison to ....
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.... as primary condition for invoking the provision is that asset should be separately identifiable and it should have independent physical existence on its own. Coordinate Bench of this Tribunal in case of ACIT vs. Anoop Neema(supra) has also considered an identical issue as under: "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 examin....
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.... 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 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 appli....
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....(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 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....
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....he 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 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 cons....
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....ies 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 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 applicat....
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....nd 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 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 invest....
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....'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 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....
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.... 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 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 o....
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....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 officer was not justified in stating that provisions u/s 115BBE were invoked by the appellant which infact was applicable from 01.04.2017 and not from 15.12.2016 (date of search). 4.1.3 In view of the above discussion, it is evident that the....
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....eferred therein is chargeable to tax at rate prescribed under section 115BBE Act. As per ld PCIT, the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions and accordingly, the order so passed has been held as erroneous and prejudicial to the interest of Revenue. Thereafter, the ld PCIT has gone ahead and held that income of the assessee is income referred in the aforesaid deeming provisions and chargeable to tax under section 115BBE of the Act. 8. Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specifi....
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....od and which he surrenders in addition to his normal business income. Similar questions have been raised regarding nature and source of cost of construction of building amounting to Rs 25,00,000/- and advances given to various persons. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is his business income. Further, the said fact is corroborated by the surrender letter dated 21.10.2016. Apparently, the ld PCIT has failed to take into consideration these documents which are very much part of the records. Following the surrender so made, the assessee has offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessment order, that assessee has voluntarily surrendered Rs 1,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. We therefore find th....
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....ws that the excess stock found during the search is part of the total stock and entire lot of stock of the assesse, part of which is recorded in the books of account and part of the same was not found recorded and therefore, treated as excess stock at the time of survey and consequently surrendered by the assessee and also offered to tax in the return of income then the excess stock cannot be as investment in specified asset or the assesse is owner of any bullion, jewellery or other valuable articles as per the provisions of section 69B of the Act. An identical issue has been considered and decided by Hon'ble High Court as well as this Tribunal in series of cases some of these are reproduced above. Accordingly in the facts of the case the excess stock would not fall in the mischief of section 69B of the Act. The question also arises whether the excess stock found during the search which is not separate from the entire lot of stock of the assessee can be treated as other valuable articles though certainly not in the nature of bullion and jewellery. This question has been considered by the Hon'ble Supreme Court in the latest judgment in case of M/s D.N. Singh vs. CIT, Central, Patna ....
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....rty or even a fixed deposit receipt issued by a bank in favour of a particular person are merely the documents of title which, though possessing much evidentiary value, do not passes any intrinsic market value. They do supply evidence of assets which by themselves are valuable but they being mere documents of title, they can neither be negotiated nor be transferred for a valuable consideration. Under the circumstances, we are of the opinion that documents of title, which have no greater value than an evidentiary one, and which do not carry any saleable interest, are not the "valuable things or articles" contemplated either by subsection (5) of section 132 of the Act or by rule 112A of the Rules. There is nothing in the record to show that the fixed deposit receipts, which are seized in this case, carry any inherent market value with them. They are merely the documents evidencing the debt due to the assessee. Similarly, the documents of title relating to an immovable property also contain no more value than an evidentiary one. Thus, since none of those documents has got any intrinsic value in terms of money, we are of the opinion that they are not covered by sub-section (5)....
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.... articles cannot be held as other valuable articles. 14. "Valuable article" means an article which is valuable and having a high price, not other ordinary articles, as in the instant case. 15. The surrendered income ought to have been treated as deemed income under the provisions of s.69 of the Act, 1961, however, on the wrong provision applied in the assessment order though the effect is one and the same the surrendered income (2011) 339 ITR 651 Chhattisgarh cannot be held that it was not an income under the provisions of s.69 of the Act, 1961. As such, the substantial question of law, i.e., (i) and (iii) are answered accordingly." (Emphasis supplied) 68. The word 'valuable' has been defined in Black's Law Dictionary as follows: - "Valuable adjective. Worth a good price; having financial or market value." 69. The word 'valuable' has been defined in the Concise Oxford Dictionary as follows: - The word 'valuable' has been defined as again an adjective. "worth a great deal of money. Very useful or important." 70. The word 'money' has been described in Black's Law Dictionary as follows: - "money. 1. The medium of ....
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....ts of similar nature. A reading of the words "any other business or commercial rights of similar nature" in clause (b) of Explanation 3 indicates that goodwill would fall under the expression "any other business or commercial right of a similar nature". The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 9. In the circumstances, we are of the view that "goodwill" is an asset under Explanation 3(b) to Section 32(1) of the Act." 75. In Rohit Pulp and Paper Mills Limited v. Collector of Central Excise, Baroda22, the Court was dealing with an exception clause in an exemption notification and considered the applicability of the Principle of Noscitur a Sociis, to the facts: "12. The principle of statutory interpretation by which a generic word receives a limited interpretation by reason of its context is well established. In the context with which we are concerned, we can legitimately draw upon the "noscitur a sociis" principle. This expression simply means that "the meaning of a word is to be judged by the company it keeps." Gajendragadkar, J. explained the scope of the rule in Sta....
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....Ltd. v. CST [(1981) 2 SCC 141 : 1981 SCC (Tax) 90] this Court had to understand the meaning of the word 'old' in the context of an entry in a taxing traffic which read thus: "Old, discarded, unserviceable or obsolete machinery, stores or vehicles including waste products......" Though the tariff item started with the use of the wide word 'old', the court came to the conclusion that "in order to fall within the expression 'old machinery' occurring in the entry, the machinery must be old machinery in the sense that it has become non-functional or non-usable". In other words, not the mere age of the machinery, which would be relevant in the wider sense, but the condition of the machinery analogous to that indicated by the words following it, was considered relevant for the purposes of the statute." 76. About Noscitur a Sociis and how it compares with ejusdem generis, the following statement in G.P. Singh (supra) on Statutory Interpretation is apposite: "It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the former." N. WHETHER BITUMEN IS 'OTHER VALUABLE ARTICLE' 77. This Court has referred to the Pr....
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....espite having a good price or worth a great deal of money, they would stand excluded from the purview of Section 69A. On the other hand, let us take an example where a person is found to be in possession of 500 tender coconuts. They would have a value and even be marketable but it may be wholly inapposite to describe the 500 tender coconuts as valuable articles. It goes both to the marketability, as also the fact that it may not be described as worth a 'good' price. Each case must be decided with reference to the facts to find out that while articles or movables worth a great deal of money or worth a good price are comprehended articles which may not command any such price must stand excluded from the ambit of the words 'other valuable articles'. The concept of 'other valuable articles' may evolve with the arrival in the market of articles, which can be treated as other valuable articles on satisfying the other tests. 78. Bitumen is defined in the Concise Oxford English Dictionary as 'a black viscous mixture of hydrocarbons obtained naturally or as a residue from petroleum distillation, used for road surfacing and roofing'. Bitumen appears to be a residual product in the p....