TaxTMI 
TaxTMI 
2025 (10) TMI 514
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....(AO) are both against the facts of this case and are untenable under the law. 2. That no reasonable and proper opportunity of being heard was allowed by the AO before passing the order. As such the order passed by the AO is liable to be cancelled. Similarly, the CIT(A) has also grossly erred in confirming the order of the AO without appreciating the facts of this case and without applying his mind. As such the order passed by the Ld. CIT(A) thereby confirming the order of the AO is bad in the eyes of law and the same is liable to be cancelled. 3. That the Ld. CIT(A) has grossly erred in confirming the addition of Rs. 8,00,000/- by treating the same as taxable u/s 69A r.w.s. 115BBE of the IT Act, 1961. The CIT(A) did not appreciate that the surrender of Rs. 8,00,000/- on account of excess cash found was also a part of business income and Ld. CIT(A) has grossly erred in confirming the same as deemed income u/s 69A with reference to section 115BBE also. The CIT(A) should have treated Rs. 8,00,000/- as normal business income at normal tax rate. 4. That the Ld. CIT(A) also should have treated the excess cash at Rs. 8,00,000/- as normal business income like exc....
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.... Ld. CIT(A)-5, Ludhiana, and the Ld. first appellate authority, after an elaborate discussion, contained in the appellate order, has granted part relief by treating the excess stock of Rs. 57 lakhs surrendered by the assessee in his return to have been explained to have been derived out of regular business activity of timber and furniture, but has considered the excess cash surrender of Rs. 8 lakhs by the assessee as deemed income as per provisions of section 69A and has upheld the application of section 115BBE of the Act, 1961 for rate purpose on the said amount. 8. The reasons as flowing from the appeal order of the first appellate authority holding the excess stock as business income is reproduced below for ready reference: "Decision with regard to surrender made under the head excess stock During the appellate proceedings, the AR has submitted copy of documents which was impounded by the Department, and which were the very basis of disclosure by the appellant during survey. These documents were available to the AO as well as submission on the basis of these documents was made by the appellant before the AO during assessment proceedings. During the ....
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.... part of another lot of stock. Accordingly, the value of article/stock of the impugned investment was being fully disclosed in the books of account, being regularized by way of surrender of business income as accepted by the AO, would certainly not fall in the mischief of section 69B of the Act. 8. Respectfully following Hon'ble Apex Court judgment in the case of M/s D. N. Singh v. CIT, Central (Supra) we hold that in the given facts of the present case, the excess stock would not fall in the mischief of section 69B of the Act. Accordingly, the impugned order of Id. CIT(A) is held to be infirm and perverse and as such, the addition is deleted. 9. In the result, the appeal filed by the assessee is allowed." The Ld. Tribunal Bench in the case of Sharp Chucks & Machines Pvt. Ltd. vs. DCIT Central Circle-1, Jalandhar in ITA No. 169Asr/2023 held in para 7, 8 & 9 of its order as under: "7. From the record, it is evident that the expenditure incurred for creating a business asset must have been generated through the business carried out by the assessee and that expenditure laid out for the purpose of business is to be allowed deduction either as expendi....
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....not be made u/s 69A, the provisions of section 115BBE will not be applicable." The Ld. Tribunal Bench in the case of Lovish Singhal & Others v. ITO ITA No. 143/Jodh/2018 held in para 14 of its order on the issue of incriminating documents as under; "14. So far as the surrender of income is on account of incriminating documents, it is not clear as to whether it was out of the business transaction, the assessee was carrying on in the regular course of business. However, authorities had not given any finding on the nature of such incriminating documents nor with regard to income surrender with respect to these documents. Therefore, in the interest of justice, I restore the issue with regard to surrender of income arising out of incriminating documents to the file of the Assessing Officer to find out the nature of such income if arising out of the business transaction carried on by the assessee and to decide the issue afresh as per law. Needless to say that the assessee should be given due opportunity before deciding the issue." Similar view has been taken by the various Hon'ble Tribunals, including jurisdictional Tribunal, in the following cases: Re....
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....sis of business-related inventory only as each of the items in the list of inventories drawn on the date of survey was related to its normal/routine business. Secondly, in the surrender letter, the appellant has mentioned that these are transaction in the nature of difference in inventory is its income from the same business. Thirdly, the appellant in its return of income filed, maintained the same instance. Fourthly, neither the survey team nor the AO has brought any other material on record to show that there was some other business activity. Thus, it to a logical conclusion that investment in excess stock was on account of same business only. Hence the action of AO in charging tax at the rate prescribed u/s 115BBE in this case of Rs. 57,00,000/- on account of excess stock is not found sustainable and therefore deleted." 9. Now, the assessee is before the tribunal on the grounds contained in the memorandum of appeal. Challenging the applicability of the deeming provision of section 69/A, on the surrendered cash amounting Rs. 8 lakhs. The Ld AR of the assessee has submitted a short paper book containing the copy of written submission filed before the first appellate authority a....
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....t 61 . 14. He further stated that on the facts of the case there is a clear finding of the Ld CIT(A) " that the items in the list of inventories drawn on the date of survey was related to its normal routine business . It has been further observed by the Ld CIT(A), that the appellant has mentioned in the surrender letter that the nature of difference in inventory is its income from business, and has disclosed the same in his return accordingly, and the survey team has not been able to show that there are some other business activity of the assessee. 15. The Ld AR further submitted that, considering the facts and circumstances of the case, and the above logical conclusion derived by the first appellate authority, in case of stock, which is found in excess treating the same to be business income, the same logic should be made applicable mutatis mutandis to the excess CASH of Rs. Eight lakhs, found in the course of survey in the same business premises relating to the same assessee in absence of any other income earning activity, and by the same logic, the excess cash should also be considered as business income. 16. He further submitted that the Ld CIT(A) was probably swayed b....
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....ssee could not give any explanation regarding source, but in the instant case the source has been explained successfully in course of first appellate proceedings, that the excess stock is out of regular business activity and the same is already accepted and treated as business income,by the Ld CIT(A), so consequently the liquidation of the same stock, will also result in business income itself. 21. The Ld AR further tried to explain the matter by citing an example, on hypothetical basis, that had the survey been conducted a month earlier, the excess quantity of stock in the premises would have been probably more and excess cash found would have been much less, and similarly, had the survey been conducted a month later, the excess stock would have been much less with corresponding increase in excess cash, because it is the same stock that is being liquidated over passage of time. 22. As such, the Ld AR concluded that it is the same excess business stock that has been sold outside the books to generate the excess cash found at the premises, and since the surrender of excess stock is already treated as business income, the surrender of excess cash should also be treated as busin....