TaxTMI 
TaxTMI 
2024 (2) TMI 520
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.... 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that provisions of sec. 115BBE of the Act are not applicable as the excess stock of Rs.1,20,49,234/-,, does not fall within the provisions of section 69/69B of the Act while on the basis of circumstantial evidences and facts of the case, the excess stock found during the course of survey clearly fall within the ambit of sec. 69B of the I.T. Act as investment was not fully disclosed in the books of account. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the provisions u/s 115BBE of the I.T. Act should not have been invoked and the tax be calculated as per normal rate taxing the excess stock as business income. For reaching this decision, he has solely relied on the assessee's version and has never required the assessee to corroborate the excess stock found to be taken as his business income 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that excess stock is business income since the assessee has incorporated the excess stock so found in his books of accounts, and also....
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....s on account of business income of the assessee and is therefore, liable to be taxed under the head of income from business & profession only. He has submitted that the director of the assessee company accepted in his statement recorded during the survey that income offered is out of undisclosed income of the assessee and therefore, the same would fall in the ambit of section 69B of the Act as investment was not fully disclosed in the books of account. The CIT(A) has accepted the contention of the assessee without examining the facts whether the excess stock found during the survey was sourced from the business income of the assessee or not. She has further submitted that the assessee has accepted that excess stock was not recorded or entered in the books of account and only after survey entries were made in the books of account without explaining the actual source of the investment made in the excess stock therefore, the provision of section 69B is applicable. The assessee has not produced a single document in support of its assertion that investment was made from the business income of the assesse and the CIT(A) has completely overlooked this aspect of the matter. She has referre....
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.... of the assessee in para 3.1.4 as under: "3.1.4. Considering the submission made by the appellant, facts discussed above and decisions of jurisdictional ITAT Indore as referred above, the appellant has recorded excess stock in the regular books of account by passing necessary entries and made available the said stock for future sales and taxation on profit thereon. It is also an undisputed fact that the appellant is having only source of income from manufacturing of confectionary items. Accordingly, nature and source of excess stock has been properly explained by the appellant. The additional income offered on account of excess stock during the course of survey is nothing but the income from business. Ld. AO has placed reliance upon the judgements in the cases of Fakir Mohd, Kazi Hasan vs. CIT (2001) 247 ITR 290 (Guj) and M/s SVS Oils Mills vs ACIT in ITA NO 765 of 2018 for treating the excess stock as deemed income u/s.69B of the Act. Facts of these cases are distinguishable on facts because in these cases unexplained money disclosed during survey was either not recorded in the books of accounts properly or its source was not explained by the assessee. The case before the Gujrat....
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....'ble Punjab and Haryana High Court has held that surrender on account of excess cash was not reflected in the books of account and no source from where it was derived was declared by the assessee and therefore, such income was held as deemed income u/s 69A of the Act. Hon'ble High Court has further held that another amount of Rs. 10,00,000/- surrendered on account of sundry creditors, repairs to building and advances to staff were related to business carried on by the assessee and upheld this view of the lower authorities. In the case of Famina Nit Fab 176 ITD 246, Hon'ble ITAT Chandigarh has treated unaccounted debtors as business income and therefore, provisions of section 69/69A/69B/69C of the Act could not be applicable. Similarly, these provisions would not be applicable to undisclosed gross profit on sales outside the books of account as it relates to business of the assessee. On other hand, Hon'ble tribunal has treated unaccounted investment in building and surrender made on account of miscellaneous discrepancies found in loose papers as deemed income within the meaning of section 69/69 A / 69 B / 69 C and also upheld applicability of provisions of section 11....
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....dered and to be assessed w/s 69, 694, 69B and 69C of the Act, as held above before us, the same is to be subjected to tax as per the provisions of section 115BBE of the Act." Therefore, the Ld. AO does not find support from the above decisions Thus, I am of the considered view that the additional income offered was on account of business income of the appellant and is, therefore, liable to be taxed under the head of 'income from business or profession' only. Provisions of section 115BBE of the Act are not applicable as the excess stock, in the facts and circumstances as narrated above, does not fall within the provisions of section 69/69B of the Act. In view of the above discussion, the AO is directed to charge income tax at the rate applicable to the income from business or profession. Accordingly, the grounds of appeal are allowed." 6. The order of the CIT(A) is now fortified by this Tribunal in case of M/s. Brij Mohandas Devi Prasad vs. ACIT(supra) in para 9 to 11 as under: "9. Firstly, we are in agreement with the very first and foremost contention of Ld. AR that in Q.No. 6 and 7 of statement, the survey-officer has nowhere asked the assessee to explain the so....
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....ises which including declared stock as per books as computed by the survey team. Therefore, it is held that the provision of section 69B of the Act cannot be made applicable as primary condition for invoking the provision is that asset should be separately identifiable and it should have independent physical existence on its own. Further, the 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 part....
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....15BBE is unlawful. Further, the amended provisions of section 115BBE are applicable from 01.04.2017 and not from the date of search. 4.1.2 I have considered the 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/....
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....tion u/s 69 alone of this fact is untenable as held by Hon'ble Jurisdictional ITAT, Indore Bench in the case of Mukesh Sangla HUF vs. DCIT (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 t....
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....me of survey excess stock was found. It is also not disputed that the 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 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 est....
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.... of such unaccounted income. The difference in stock so worked out by the authorities 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 o....
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....xcess 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 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 overal....
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....tails of M/s A'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 - 4000....
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.... 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. 8. We on perusal of the above finding and the various judgments and decisions referred hereinabove by Ld. CIT(A) find that the alleged excess stock was not kept separately at any other place and was part of the total business tock found at the assessee's business premises are sufficient enough to indicate that the alleged investment in excess stock is part of the business income. We also find that alleged excess stock was duly accepted by assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during search proceedings and therefore is not an undisclosed income as held by the ld. AO. We, therefore, find no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing at Rs. 1,41,75,568/-found during the course of search. Thus, grounds no. 1 to 3 raised by....