2024 (1) TMI 380

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....signing proper reasons and justification. 3. The CIT(Appeals) failed to appreciate that having not noticed the fact of inclusion of the differential/disputed amount presumed to be excess stock for purpose of taxation, the sustenance of the disputed sum forming part of the computation of taxable total income once again should be reckoned as bad in law in view of complete defiance of the principles of fairness in taxation. 4. The CIT(Appeals) failed to appreciate that in any event the presumption of the disputed differential sum which was presumed to be excess stock was wholly unjustified and ought to have appreciated that the arithmetical accuracy of the said disputed sum was not verified as well as checked by the Assessing Officer thereby vitiating the related findings in the impugned order. 5. The CIT(Appeals) failed to appreciate that the sustenance of the said addition based on the findings in para 7.2 of the impugned order was wholly unjustified and ought to have appreciated that the decision of the Jurisdictional High Court referred to therein had no application to the facts of the present case thereby vitiating the related findings. 6. The ....

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....s accepted the excess stock of gold and silver vide a statement u/s. 131 of the Act dated 22-01-2019. The assessee also stated that he has been charging 1.5% interest per month on pawned items, whereas income offered in the income tax return as 1% per month. The balance of 0.5% is not reflected in the ITR as filed by the assessee. Therefore, the assessee has agreed to offer an amount of Rs. 13,04,180/- to the tax thereon. 4. The Ld. AO observed that the assessee did not make any submissions to the show cause notice date 23-01-2019 through which it was proposed to add the excess stock value Rs. 1,59,28,910 (gold) and Rs. 18,94,030/- (silver) u/s. 69B of the Act. The said excess stock of gold and silver are not recorded by the assessee in his books of accounts. The assessee also failed to furnish any documentary evidence to substantiate the claim that the excess stock was from regular business activity. No source for purchase of excess stock, no bills/vouchers etc. were filed by the assessee in support of his claim. Therefore, the ld. AO added the value of the excess stock of gold and silver Rs. 1,78,22,940/- u/s 69B, and Rs. 3,38,300/-, respectively u/s 69A of the Act to the tota....

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.... jurisdictional Madras High Court, I have no other alternative except to confirm the order of the AO assessing the value of excess stock found as unexplained investment u/s 69B. I therefore, sustain the addition of Rs. 1,78,22,940/- made u/s 69B and taxed under the rates of section 115BBE and dismiss the ground raised. 7.3. The other addition of Rs. 3,38,300/- represents excess cash found at the time of survey u/s 133A for which the appellant had no explanation. The appellant had not adduced any evidence even in the appeal proceedings before me. I therefore sustain the addition of Rs. 3,38,300 made as unexplained money u/s 69A of the Act and dismiss the grounds raised. 8. In the result the appeal is dismissed." 9. We observe that the assessee is engaged in the business of Jewellery and Pawn Broking which is an undisputed fact. The excess stock found during the survey operation are gold and silver but the same were not recorded by the assessee in his books of account. The assessee submitted before the ld. CIT(A) that the excess stock found pertain to the business carried on by him and accumulated over a period of time. Submission was also made before the ld. AO ....

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....t of business income earned for the relevant assessment year, because, it is a general practice in business that whatever excess income earned is kept in the form of stock and debtors. Since the excess stock found during the course of survey was not separately identified and was mixed with regular business income, the assessee has rightly offered additional income declared during the course of survey under the head 'income from business and profession', and this position is supported by the decision of the Rajasthan High Court in the case of CIT vs. Bajargan Traders in ITA No. 258 /2017 dated 12-09-2017. This issue is further supported by the decision of the co-ordinate Bench of ITAT, in the case of M/s Overseas Leathers in ITA No. 962 / Chny / 2022, wherein, under identical set of facts, the Tribunal by considering the decision of the Hon'ble High Court of Madras in the case of M/s SVS Oil Mils v. ACIT (supra) held that excess stock found during the course of survey is assessable under the head ' income from business', but not u/s 69B of the Act, as unexplained investment. A similar view has been taken by the co-ordinate Bench of the ITAT Chennai Benches in the case of M/s Mookamb....

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....e quite identical to the facts of the present appeal before us. 4. After going through the case law of Hon'ble High Court of Madras in the case of M/s SVS Oil Mills vs. ACIT (supra), we find that said case is distinguishable on facts. In that case, though stock was added in the stock register but there was no corresponding credit in the books of accounts. It was thus held that stock could not come in from vacuum. Therefore, the excess stock was held to be unexplained investment. However, in the present case, there is corresponding credit to partners' capital account. Therefore, this case law is distinguishable on facts. 5. In the result, the appeal stand allowed in terms of our above order." 12. Here, we also consider the decision of the ITAT, Indore Bench dated 09-03-2020 in the case of Shri Rajesh Kumar Bajaj vs. ACIT, Khandwa under ITA No. 16/Ind/2019, wherein the ITAT, Indore Bench decided the case as under: "18. We therefore in the given facts and circumstances of the case are of the considered view that though the alleged surrendered income of ITA No. 16 / Ind / 2019 Rajesh Kumar Bajaj Rs. 92,81,150/- is a business income but since assessee being individu....