TaxTMI 
TaxTMI 
2025 (4) TMI 1662
X X X X Extracts X X X X
X X X X Extracts X X X X
....e closing stock as on 12.02.2019 which amounted to Rs.49,05,313/-. However, the physical inventory of stock as on 13.02.2019 was calculated at Rs.89,10,523/- by the survey team thus giving rise to the excess stock of Rs.40,05,210/-. Assessee was asked to explain the excess stock to which it was responded that the business and godown premises are not separately and clearly identifiable but is mixed part of lots of stock which includes regular stock also. Further, assessee offered it as regular business income for the current year. Subsequently, assessee filed the return of income on 22.10.2019 showing income of Rs.45,62,440/-. Case of the assessee selected for compulsory scrutiny followed by validly serving statutory notices. The only issue dealt with by ld. AO was regarding the excess stock which was offered to tax by the assessee as business income in the audited Profit and Loss Account. However, ld. AO was of the considered view that the excess stock is not part of the business income but is an unaccounted income liable to be taxed as income from other sources. Accordingly, ld. AO reduced the amount of excess stock of Rs.40,05,210/- from the business income and taxed it as deemed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of survey proceedings, statement recorded during survey placed at pages 7 to 12 and further reliance was placed on the following decisions : 1. DCIT Vs. Vaishali Agro Soya Products - ITA No.634/Pun/2024 dated 11.09.2024 2. M/s. Suresh Aluminum Vs. ACIT - ITA No.62/Ind/2024, dated 09.08.2024 3. Vijay Shriram Gundale Vs. ACIT - ITA No.79/Pun/2023 dated 03.08.2023 5. On the other hand, ld. Departmental Representative supported the orders of the lower authorities and submitted that the excess stock is nothing but investment of unaccounted income of preceding years as well as current year and therefore has rightly been taxed as income from other sources. 6. We have heard the rival contentions and perused the record placed before us. The only issue for our consideration is whether the ld.CIT(A) was justified in affirming the action of the AO of treating the excess stock as income from other sources and applying tax rate u/s.115BBE of the Act as against the excess stock being declared as regular business income by the assessee and having paid normal taxes. We notice that the assessee was subjected to survey proceedings u/s.133A of the Act on 13.02.2019. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gular business income and both the lower authorities have erred in treating it as income from other sources and taxing the assessee u/s.115BBE of the Act. Our view is further supported by the recent decision of Coordinate Bench in the case of Kolhapur Timber And Furniture Mart Vs. ACIT vide ITA No.2697/Pun/2024 order dated 27.03.2025 where also similar issue has been raised and this Tribunal after referring to various decisions and decided the issue in favour of the assessee holding that the source of excess stock is business income observing as follows : "8. We have heard rival contentions and perused the record placed before us. The only issue for our consideration is whether the value of excess stock found at the premises of the assessee during the course of survey u/s 133A of the Act on 12.02.2019 is to be treated as 'business income' or 'income from other sources'. We note that the assessee is a partnership firm and its only source of income is from machinery packing small furniture items, small cupboard etc. and other packing material. The alleged excess stock was calculated by the Department on the basis of Tentative Trading Account prepared on the date of survey. D....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relied by both the sides. The only issue for my consideration is that whether Ld. CIT(A) erred in confirming the action of the Ld. A.O applying the provisions of Section 115BBE of the Act for taxing the surrendered income in the form of excess stock at Rs.52,25,297/- found during the course of survey u/s 133A of the Act. I observe that the assessee has accepted the excess stock and have offered it to tax and paid due taxes as per the normal provisions of Income Tax Act. Ld. A.O invoked provisions of Section 115BBE of the Act treating the surrendered income as unexplained investment and thus calculated the tax on higher rate as provided u/s 115BBE of the Act. 6.1 The question before me is whether the surrendered income is to be treated as 'business income or as Income from other source u/s 69 of the Act'. For this the nature of surrendered income needs to be examined. Undisputedly except the physical stock taken and calculation of excess stock, no other incriminating material was found during the course of survey nor any other reference to any evidence has been made in the assessment order which could indicate that the assessee carries out any other activity or has income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urther supported by the affidavit placed before Ld. CIT(A) that there is no unexplained investment but it is purely business income which accumulated from past period and now offered to tax. Now provisions of Section 69 of the Act comes into play when there are certain investment which are not recorded in the books of accounts but in the case of the assessee since the stock records are not maintained and they are merely estimated there is no concrete evidence of any unaccounted investment in stock. Had there been the stock records available at the time of survey and the quantitative details of the same was available in the stock records and then during the course of survey if the excess stock in quantitative form had been found then the case of the revenue could have been more stronger. 6.2 But in the instant case I observe that the assessee estimated the stock at the year end and even the revenue authority have estimated the stock in hand on survey date at Rs.27,59,426/-. But the method applied by survey team for calculating such stock and whether it was actually the stock as per books is nowhere discernable from the records. Further it is also noted that no other incrimi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entative of both the sides. The Ld. Senior DR has relied on the judgment of Punjab & Haryana High Court in the case of Kim Pharma (P.) Ltd. vs. CIT(supra) to submit that where the amount surrendered during survey was not reflected in the books of accounts and no source from where it was derived was declared by the assessee, then it is assessable as deemed income of assessee u/s. 69A of the Act and not as business income. In this case the Assessing Officer made addition of surrendered amount u/s. 69 of the Act as the assessee could not explain the source from where it was derived by the assessee. In the present case undisputedly the Assessing Officer has not made any addition u/s. 69 or any provision of the Act and has accepted return income of the assessee. In the present case we are in agreement with the contention of the learned AR that the orders of the authorities below clearly reveal that the amount of excess stock & excess cash found during the course of survey business income of the assessee as the assessee is in the business of trading in jewellery, metal of bullion and the excess stock found during the search & survey was accumulated from transaction of metal of bullion ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s income and has successfully explained the source from where the said surrendered excess stock and excess cash was earned, which was business activity of assessee of trading in jewellery & gems and Adat/dalali in the same field. The coordinate bench of the Tribunal in the various orders including order in the case of Shri Lovish Singhal v/s. ITO (supra) by following the judgment of Hon'ble Rajasthan High Court in the case of Bajrang Traders (supra) observed that the excess stock found during the course of survey and surrendered made thereof was found to be taxable as business income under the head "Income from business & profession". Identical facts and circumstances as noted above have been found to be existing in the present case then the Ld. CIT(A) was correct and justified in dismissing the contention of the AO and holding that the AO was not right in observing that the assessee is liable to be taxed as per provision of section 115BBE. Therefore, we too have no hesitation in concluding that the facts of present case do nothing the impugned income in the clutches of section 69/69A/69B and therefore do not warrant application of section 115BBE at all. We conclude so and dism....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8.2023 and the same reads as under :- "7. Heard both the parties and perused the material available on record. There is no dispute regarding offering of additional income on account of excess stock for an amount of Rs.37,00,000/- during the course of survey. We note that as rightly pointed by the ld. AR which is not disputed by the ld. DR crediting the said additional income to profit and loss account and by including in the computation of income in the total income of the assessee which clearly demonstrate the assessee offered the same as business income. The ld. AR vehemently submitted the assessee explained the difference in valuation stock as per the books explained by the assessee through answers to Q. Nos. 10 and 11 of the statement u/s. 131 of the Act and also in response to notice invoking the provisions u/s. 115BBE of the Act during the course of assessment proceedings. We note that the Q. No. 10 is reproduced by the CIT(A) at page No. 10 of the impugned order and on perusal of the same, we note that the assessee explained the difference of Rs.37,00,000/- as stock purchased on high demand during the marriage seasons and bills will be received late. Therefore, it c....