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2022 (7) TMI 1483
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....e same shall be applied mutatis mutandis to the other appeals also. 3. The sole ground raised in appeal of the assessee in ITA No.249/RPR/2019 is as under :- 1. In the facts & circumstances of the case and in law, Ld. CIT(A) erred in holding that the income of Rs. 49,98,762/- surrendered during survey is not assessable as business income but as undisclosed income. The order of Ld. CIT(A) on this issue is erroneous, illegal and not justified. 4. Brief facts of the case are that the assessee is a partnership firm doing business of manufacturing and sale of rice and its by-products. The assessee filed its return of income electronically on 29.09.2012 disclosing total income at Rs.80,15,510/-. A survey u/s.133A of the Act was conducted in the business premises of the assessee on 17.01.2012. It was noticed by the survey team that there was huge difference in the stock and in cash found at the business premises. The assessee was required to explain the huge difference of stock and excess cash found at the business premises. No explanation or evidence was furnished in support of the excess stock and cash found. The amount of difference found at the time of search was also s....
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....h). 2. Decision of Hon'ble Chhattisgarh High Court is distinguishable on following points: - i) In Dhanush General Stores, vide para 5, it is observed that the AO came to conclusion that the assessee did not disclose surrendered amount in its return of income. Case of the assessee Assessee disclosed the surrendered amount in the return of income. ii) In para 11, Hon'ble High Court observed that assessee surrendered the income in the trading and profit & loss a/c but not in the computation of income and so it cannot be held as business income and if the income was treated as business income, it must find place in the computation of income. Case of the assessee The surrendered income has been shown in the computation of income. iii) Vide para 12, Hon'ble High Court held that the Tribunal rightly concluded that the excess stock found was not shown in the computation and the assessee did not deposit income tax on the real income. Case of the assessee Since the excess stock and cash has been shown in the computation of income, the assessee has paid tax on its correct income. iv) On page no. 2, para....
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....rofit having been enjoyed systematically by the assessee. Since there is no other source except business, any such accumulated profit would be from business only. Statement during survey It was stated that investment in excess stock was out of the undisclosed income of the assessee firm of the current year (PN 11 of PB-1). Excess cash was also offered as income of business (PN 10 of PB-1). Since there is no other source of income, even the undisclosed income would be from business only. 8. Issue decided by Hon'bl1`e Raipur Bench of I TAT i) Venkatesh Marbles vs ACIT in ITA no. 4/BIL/2016 dt. 22.10.2018, PN 20 to 27 ofPB-2. ii) ACIT vs Atul Enterprises (2016) 46 CCH 142 (Raipur), PN 28 to 34 of PB-2, relevant finding on PN 33. 9. Deeming sections like sec. 68, 69 etc. do not prescribe the head of income under which it is assessable and head of income is to be decided on the basis of facts of the case and surrounding circumstances: - -Sagar Samrat vs ACIT in ITA no. 546/Pun/2017 dt. 27.10.2020, PN 11 to 19 of PB-2, relevant finding on PN 16, para no. 8. ACIT vs Miraj Tradecom Pvt. Ltd. in ITA no. 124/Jodh/2017 dt....
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....339 ITR 651 (CO) and therefore the unexplained income which was not shown separately in the computation of income should be treated as income from other sources and not income from business. On this basis the contentions of the assessee are not tenable, thus orders of the revenue authorities shall be upheld. 7. In rebuttal, Ld AR further argued that the facts of case decided by the hon'ble high court relied upon by the revenue authorities i.e. Dhanush General Stores (supra) are distinguishable from the present case, the Hon'ble High Court in the said order has categorically observed that although the amount surrendered was credited to profit & loss account, the same was not offered in the computation and as such the assessee had not deposited income tax on the surrendered income. However, in the case of assessee the surrendered income is not only credited to the profit & loss a/c but also offered in the computation. The Ld AR substantiated these facts by showing us the Audited P&L of the assessee placed on page 7 of its paper book wherein the surrender income of Rs. 49,98,762/- has been specifically shown under schedule "M" and the net profit arrived considering the surrendered ....
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....of mismatch in physical stock and accounting balance of the stock can not be treated as income from the other source, the same has to be brought to tax under income from business, which the assessee has rightly done. Our view on this aspect has a concurrence from the finding of Hon'ble Rajasthan High Court in the case of CIT Vs. Bajrang Traders, which is discussed here under in the coming paras. Relevant Case laws and findings : i) Sagar Samrat Vs. ACIT, ITA No.546/Pun/2017, order dated 27.10.2020, wherein the Pune Bench of the Tribunal has held as under :- 4. Having heard both the sides through virtual court and gone through the relevant material on record, it is found as an admitted position that during the course of survey at the business premises of the assessee certain excess cash, excess stock and undisclosed advances receivable totaling Rs.50.25 lakh and odd were found and the assessee offered the same as additional income. On such declaration, necessary entries were passed and the amount was credited to the Profit and loss account at the time of finalization of accounts and also offered it for taxation. The assessee worked out the amount of partne....
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....classified under the following heads of income..'. There are five heads, which include `Profits and gains of business or profession'. Sections 69 and 69A fall under the Chapter VI of the Act with sub- head `Aggregation of income'. From the language of these sections as reproduced supra, it is overt that they deal with deeming unexplained investments and unexplained money etc. as income of the financial year in which the assessee has made unexplained investments or found to be owner of unexplained money etc. These provisions do not provide for any separate head under which such incomes are to be covered. On a conjoint reading of section 14 por una parte and sections 69/69A por otra parte, it turns out that such incomes have to be classified under one of the five heads. This proposition of law has been judicially recognised in certain decisions including CIT VS. Shilpa Dyeing & Printing Mills (P.) Ltd. (2013) 219 Taxman 279 (Gujarat). 8. It is observed that the survey was conducted at the business premises of the assessee. Excess cash, stock and unrecorded advances were found from the business premises only. The AO has not referred to any other source of income o....
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....3 as under :- 13. I have heard the rival contentions and record perused. I have also carefully gone through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld AR during the course of hearing before the ITAT in the context of factual matrix of the case. From the record, I find that during the course of survey, income was surrendered by the assessee on account of stock, excess cash found out of sale of stock and also in respect of incriminating documents. As per judicial pronouncements cited by the 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....
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....f Fakir Mohd. Hazi Hasan 247 ITR 290 that unaccounted income ought to be categorized under the residuary head of 'Income from other sources'. In respect to the said issue, the findings of the Coordinate Bench are as follows: "We have heard the 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 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 jewellery. The Coordinate Bench in the case of Choksi Hiralal Mangnlal vs. DCIT 131, TTJ (Ahd.) 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 ....
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....ed in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the 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 regularize 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 th....
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....es in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman. Further, in past, no such disallowance/addition was made. Therefore, neither the addition of notional interest made by the AO or disallowance of interest as held by the ld. CIT(A) is Rs. 1,96,73,637/-. Partners are paid interest @ 12% the balance in the partners account is much more than the amount advanced to Smt. Rita Gupta who is a wife of one of the partner. Therefore, even the 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. 10. In view of the above judicial pronouncements as well as the facts and circumstances of the case, we are of the opinion that the investment in the excess stock ought to be taxed under the head "business income" and not under the head....
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