2024 (9) TMI 851

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....tock found during survey cannot be taxed u/s 115BBE vis-a-vis section 69 cannot be applied on that." 3. All the three grounds relates to one single issue, in the matter of excess stock being found during survey at the business premises of the assessee and disclosed by the assessee before the survey team and considered for taxation in the return of income, has been taxed at the rates prescribed u/s 115BBE by applying the deeming provisions of section 69 of the Act 61. 4. The facts of the case in brief are that the assessee is a partnership firm carrying on the business of wholesale and retail trading of various types of cosmetic goods, and other allied products. A survey u/s 133A of the Act 61, was carried out at the business premises of the assessee on 7th February, 2019, and in course of survey, stock inventories were taken by the survey team. During the course of survey, the assessee declared excess stock of cosmetic goods available in the shop premises amounting to Rs. 55 lakhs, and surrendered the same for taxation. 5. The said additional stock so surrendered by the assessee has been considered and recorded separately in a trading account as at 31/03/2019, and has been....

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.... cosmetics and allied products, and it is the same goods which are traded by the assessee in usual course of business activity. The assessee is doing the same business since more than last 30 years, and the old stocks are also brought forward from earlier years, and business profits earned over the years are rolled back into stocks. The valuation of the stocks found has been done at present buying rates which has resulted in a higher figure of valuation difference, even though a good quantity of the stocks are old stocks. It has also been explained by the assessee that, even after carrying out of a thorough survey at the business premises, not a single item or product or article, NOT relating to cosmetics has been found, and no documents, bills or vouchers, has been found which may point towards any other business activity of the assessee, other than cosmetics. The valuation difference arising out of the valuation conducted by the survey team, amounting to Rs. 55,33,130/- (rounded off to Rs. 55 Lakhs), has been accepted by the assessee on the spot and the assessee agreed to the said surrender, to buy peace of mind. Subsequently, the said surrender has been accounted for in the regu....

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....any other data to identify as to what exactly were the items which were forming part of disclosed business activity. It is an undisputed fact that there were discrepancies in the stock physically found and stock as per books of account. However, the appellant has not been able to bring anything on record to prove that the difference is due to stock belonging to the same business. (iv) Further as per the appellant, it was dealing in trading of cosmetics. However, as per stock inventory prepared, there are other items as well. Eg there were various type of oil, all of which cannot be said to be part of cosmetic. (v) The appellant has heavily replied upon the case of Poonam Marwaha. As per the appellant, that was a similar case and AO has treated surrendered income in that case as business income. This contention of the appellant is not acceptable as that case is not in appeal before the undersigned and therefore, no decision can be given on the merits or similarities and differences of that case. Even otherwise the AO in his remand report has clearly pointed out the difference between that case and the case of the appellant. The Report was provided to the appellant,....

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....e firm, and question was asked related to discrepancy of stock: "Q. No. 11: Have you maintained books of account and where are the books of account lying and whether the books of account have been written upto date? Ans: I have maintained cash book, ledger, day book, and these are lying in the office of the auditor and the books of account has been written upto 31.01.2019. Q. No. 14: There is discrepancies in this stock found amounting to Rs. 55 lacs during the course of survey u/s 133A; please explain why the same may not be treated as unaccounted stock? Ans. I agree that there is difference of stock at Rs. 55 lacs and I shall pay the tax accordingly over and above the normal business income." 12.1 We find that the stock physically found has been valued and then compared with the value of stock so recorded in the books of account and the difference in the value of stock so found belonging to the assessee firm has been offered to tax. 12.2 There is no dispute that the stock that has been found are the same stock in which the assessee is doing business. It is a mixed stock without any separate identity. The revenue has not pointed out that t....

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.... has been found. 13.1 As stated above, no undisclosed asset other than cosmetics has been found and what is not declared to the department are receipts from the business and not any investment and cannot be correlated with any specific asset. 13.2 At this stage, we would like to rely on the judgment of the Coordinate Bench of ITAT Chandigarh in the case of A.P. Knit Fab ITA 732/Chd/2022 order dated 15.02.2024 and also on the decision of the Hon'ble Rajasthan High Court in the case of PCIT vs. Bajargan Traders ITA 258/2017 dated 12.09.2017. Relevant portion of the Hon'ble High Court judgment is reproduced as below: "2.7. It is further submitted that the real issue in this case is whether the excess stock surrendered should be made as a part of business income or not and if so, assessee can claim deduction on account of payment of remuneration to partners on account u/s 40b(v). In this regard, our reference was drawn to the decision of Co-ordinate Bench in case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dted 30.09.2016). In that case, the question before the Coordinate Bench was "whether the CIT(A)-2, Udaipur has erred in directing the AO to assess the unexplained ....

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....) part of declared asset falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT(A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found." 2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss acco....