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2023 (10) TMI 194
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.... have seen that addition under section 69B r.w.s 115BBE of the Income Tax Act is warranted only if the twin condition that the excess stock found at the time of survey i.S not recorded in the books of account and the appellant offers no satisfactory explanation. In the instant case the appellant has offered satisfactory explanation that the surplus stock found at the time of survey is generated out of business income, which source stands uncontroverted by the learned Assessing officer. 4. The Ld. Commissioner of Income Tax (Appeals)-18 ought to have seen that* the appellant while accounting for difference in surplus stocks, found at the time of survey, by adding the same in the stock register and passing corresponding entry in financial books, has also given proper explanation for the source from which the surplus stock was acquired which stands uncontroverted by the revenue. 5. The Ld. Commissioner of Income Tax (Appeals)-18 ought to have seen that the excess stock found at the time of survey is part of the mixed stock and cannot be clearly identified from declared stock as per the books of accounts maintained by the appellant, 6. The Ld. Commissioner of....
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....d be considered as stock in trade of the assessee and income if any arising out of such excess stock should be assessed under the head income from business only. The Assessing Officer, however was not satisfied with the explanation furnished by the assessee and according to the Assessing Officer, once excess stock is found which is not recorded in the books of accounts of the assessee, needs to be assessed as unexplained investment u/s. 69B of the Act and thus, by following the decision of Hon'ble High Court of Madras in the case of M/s. SVS Oil Mills vs ACIT [2019] 418 ITR 0442, opined that explanation offered by the assessee to offer income quantified towards excess stock found during the course of survey under the head business income is not satisfactory and thus, rejected arguments of the assessee and assessed sum of Rs. 3,39,98,188/- u/s. 69B of the Act. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has filed detailed written submission on the issue along with certain judicial precedents including the decision of Hon'ble Rajasthan High Court in the case of CIT vs Bajargan Traders, in I....
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....ed stock was arrived at in the presence of the assessee during survey and the assessee has never explained how the source for investment in excess stock emerged from his business. As both the limbs of section 69B gets satisfied, it is assessable under that section 698- Mere showing it as 'other income' under business head will not distinguish his case. It: is to be noted that this 'other income' shown is over and above the net profit from the accounted business. No proof given to show how the 'other income' has arisen from business. Thus; SVS Oil Mills case squarely applies in the assessee's case and not that of Hon'ble Rajasthan High Court decision in the case of Pr.CIT vs. Bajargan Traders in ITA No.258 of 2017. It is well settled principle of law that if there is conflicting views rendered by different High Courts, the view taken by the jurisdictional High Court is binding in the jurisdictional area of the respective High Court. The Hon'ble Bombay High Court in the case of Subramaniam vs,- Siemens India Ltd. (1985) 156 ITR 1 l (Born.) held that so far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court....
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....f survey and by considering various decisions including the decision of Hon'ble High Court of Madras in the case of SVS Oil Mills vs ACIT (Supra), held that once assessee offered explanation about the excess stock found during the course of survey, then same needs to be assessed under the head income from business, because such excess stock was acquired out of business income earned by the assessee for the relevant assessment year. In this regard, he relied upon the decision of ITAT, Chennai Benches in the case of M/s. Mookambika Impex vs DCIT in ITA No. 299/Chny/2023 dated 26.07.2023. 6. The ld. SR-AR, Shri. AR V Sreenivasan, Addl. CIT, supporting the order of the ld. CIT(A) submitted that, when survey took place, presence of excess stock was not disputed by the assessee. Further, excess stock was found on account of quantification when compared to book stock. The assessee could not explain source for excess stock and also agreed to offer additional income for taxation. Therefore, once there is an excess stock, then same needs to be assessed u/s. 69B of the Act and this principle is supported by the decision of the Hon'ble Madras High Court in the case of SVS Oil Mills vs ACIT ....
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....essee, then same cannot be considered as unexplained investment, which is taxable u/s. 69B of the Act. This is because, it is a common practice in trade that income generated from business is plugged back into the business in the form of stock in trade or spent for other purpose like acquisition of asset etc. In the present case, during the course of survey, except excess stock in trade, no other investment in any kind of asset is found by the Department. Therefore, from the above fact, it is very clear that income earned from the business has been kept in the form of stock in trade. Therefore, the explanation of the assessee that excess stock found during the course of survey is acquired out of business income generated for the impugned assessment year is reasonable and acceptable. 8. At this stage, it is relevant to consider the case laws relied by the assessee. The Ld. Counsel for the assessee, relied upon the decision of ITAT, Chennai Benches in the case of M/s. Overseas Leathers vs DCIT (Supra). We find that the ITAT, Chennai Benches in the above case has considered an identical issue of assessment of excess stock found during the course of survey u/s. 69B of the Act and af....
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....t or in acquiring some asset and is not recorded in the books of accounts maintained for that financial year and further, the assessee offers no explanation or explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory. In this case, the assessee has offered explanation towards excess stock found during the course of survey, in response to a specific question and stated that such excess stock is generated out of the business income of the current financial year, which will be offered to tax as an additional income of the firm for the assessment year 2018-19. From the above, it is very clear that it is not a case of the AO that the assessee has not offered any explanation towards excess stock found during the course of survey, but it is a case of explanation offered by the assessee is not satisfactory with the opinion of the Assessing Officer. Therefore, it is necessary to examine the issue in light of explanation offered by the assessee towards excess stock found during the course of survey to ascertain whether source for such excess stock is generated out of business income or income from undisclosed source. 12. During the course of su....
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....business premises of the assessee, which in our considered view represents business income. 13. Coming back to the case laws relied upon by the AO and the Ld. Counsel for the assessee. The AO has relied upon the decision of Hon'ble High Court of Madras in the case of SVS SVS Oils Mills vs ACIT (Supra). We find that in the said case, although excess stock was found during the course of survey u/s. 133A of the Act, which the assessee did not accounted in his books of accounts and also not brought to tax in the relevant assessment years. The AO has made additions towards excess stock as unexplained investment u/s. 69B of the Act in absence of necessary explanation with regard to source for said excess stock. Under those facts, the Hon'ble Madras High Court came to the conclusion that excess stock found during the course of survey should be assessed u/s. 69B of the Act. In this case, facts are entirely different. The excess stock found during the course of survey was mixed with regular stock in trade of the assessee in its business. The survey team was also not identified excess stock separately, but was valued because the assessee could not reconcile the difference in stock i....
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....ct of gold and jewellery. The Coordinate Bench in the case of Choksi Hiralal Mangnlal 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 u/s 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 ....
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....profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/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 and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. 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 foodgrains, 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 decision of the Co:- ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard....
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....disallowance made @ 4% is not justified and the same should be restricted @ 2% only. Reliance is also placed on the following cases. .CIT vs. Ram Kishan Verma (2016) 132 DTR 107/132 Taxman 107 (Raj.)(HC) . CIT vs. Vijay Solvex Ltd. (2015) 113 DTR 382 (Raj.) (HC) 4. We are in complete agreement with the view taken by the Tribunal. No substantial question of law arises." 15. A similar view has been taken by the Coordinate bench of ITAT, Jaipur in the case of ACIT vs Sanjay Bairathi Gems Ltd in ITA No. 157/JPR/2017, dated 08.08.2017 and also the Ahmedabad Bench of ITAT in the case of Chokshi Hiralal Maganlal vs DCIT in ITA NO. 486/AHD/2008. 16. In this view of the matter and considering facts and circumstances of the case and also by following the case laws discussed herein above, we are of the considered view that when the assessee has explained source for excess stock found during the course of survey, is out of income generated from current year business and explanation offered by the assessee is plausible explanation, then income offered towards excess stock cannot be treated as unexplained investment u/s. 69B of the Act, and also provisions of section 1....