TaxTMI 
TaxTMI 
TaxTMI 
2020 (11) TMI 1110
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....ional income declared during the search. The Assessing Officer (AO) completed the assessment accepting the income returned and taxed the entire income @30% by an order dated 28.12.2018. Subsequently, Ld.Pr.CIT (Central), Visakhapatnam has called for the records and examined the same. On perusal of the records, the Pr.CIT noticed that the AO taxed the undisclosed income representing unexplained stock @30% instead of 60% as required u/s 115BBE of the Act. The Pr.CIT called for explanation from the assessee as to why the unexplained investment declared by the assessee should not be taxed @60% as per section 115BBE of the Act. The assessee filed explanation objecting for treating the excess stock as unexplained investment u/s 69 of the Act. The assessee also objected before the Pr.CIT to take up the case for revision u/s 263 of the Act and relied on the following decisions. i) Malabar Industries Co. Ltd Vs. CIT 243 ITR 83 (SC) ii) CIT Vs. Max India Ltd., 295 ITR 282 (SC) iii) Spectra Shares and Scrips P. Ltd. Vs. CIT 36 Taxmann.com 348 (HC AP) iv) CIT Vs. Srinivasa Hatcheries Pvt. Ltd., 60 Taxmann.com 207 (HC AP) v) CIT Vs. P.D. Abraham 48 taxmann.com 352 (Kerala HC) vi) Ba....
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.... business income, hence, there is no case for application of section 115BBE of the Act or unexplained investment u/s 69 of the Act. The Ld.AR further argued that the issue with regard to excess stock to be assessed as business income or not was examined by the AO in notice issued u/s 142(1) for which the assessee had filed explanation. Referring to page No. 13 to 17 of the paper book, the Ld.AR drawn our attention to the questionnaire issued by the AO specifically to the item No.4 in page No. 16, wherein, it is observed that the AO has called for explanation of the assessee as to why the said sum of Rs. 7,60,53,000/- should not be added to the total income u/s 69 and apply the provisions of section 115BBE of the Act. The Ld.AR further submitted that in response to the notice issued u/s 142(1) on 19.11.2018, the assessee filed its explanation vide letter dated 28.12.2018 which was placed at page No. 18 to 22 of the paper book. In the reply submitted, the assessee stated that the excess stock in question required to be taxed as business income and accordingly it has admitted the other operating income under the head 'profits and gains' of business. He invited our ....
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....ion or did not bring any income or part of income u/s 69 of the Act. During the course of assessment proceedings, the AO has also called for explanation of the assessee as to why the additional income admitted by the assessee should not be treated as undisclosed investment u/s 69 of the Act, applying the provisions of section 115BBE of the Act. The assessee filed explanation, claiming that the additional income admitted by the assessee constitute business income and the same cannot be assessed u/s section 69 and no case for application of the provisions of section 115BBE of the Act. For the sake of clarity and convenience, we extract relevant part of the explanation offered by the assessee before the AO which is placed at page 19 to 22 of the paper book and the same reads as under : "Accordingly, our firm has brought excess stock value to the books of account by passing the necessary entries in the P&L Account as well. An amount of Rs. 7,60,53,000/- was accordingly admitted as 'other income' in Schedule L - 'other operating income' and the same was also shown in the return filed in the relevant columns under the head "Profits and Gains of the Business" in Par....
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..../JP/2015)dated 30.09.2016 In the case of S P Equipment and Services vs ACIT (33 DTR 265), the provision of Section 40(b) was also made applicable on the profits earned by the firm. In the case of M/s Choksi Hiralal Maganlal vs DClT (45 SOT 349), the ITAT has held that "in the in the instant case, excess stock found during the survey was not separately and clearly identifiable but it is part of mixed lots of stock found at the premises which included declared stock as per the books and also excess stock as computed by the survey officer, the provision of Section 69(B) could not be made applicable as primary condition for invoking the provisions of Section 69A, 69.8 is that the asset should be separately identifiable and it should have independent physical existence of its own.-Since, the excess stock was a result of accumulation of profit from business over the years and had not been kept identifiable separately but was part of overall physical stock found, the investment in the excess stock had to be treated as business income". In the case of ITO vs Micro Marbles Private Limited (66 SOT 76), it was held that the incomes surrendered by the Assessee at the time of survey ac....
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.... interpretation which favours the subjects, as against the Revenue, has to be preferred". Therefore, the amendment brought in December, 2016 is not applicable to the facts of the case, as the excess stock was found in the course of search which was correctly offered under, the head Income from Business" Having regard to the above, we request you not to treat the Additional Income offered of Rs 7,60,53,000/- under Profits and Gains from Business or Profession once again as Investment u/s 69 B of the Income Tax Act, 1961 and not to tax as per the provisions of section 115 BBE." 5.1. From the explanation offered by the assessee, we observe that there are two possible views with regard to excess stock found during the course of search/survey in the premises of the assessee. According to the decisions relied upon by the assessee, the same forms part of business income and the same cannot be assessed u/s 69 of the Act. There are two possible views on assessment of business stock as business income as well as unexplained investment as per the views of Pr.CIT and the assessee. The AO after examining the explanation taken a view that the excess stock required to be assessed as business....