TaxTMI 
TaxTMI 
2025 (11) TMI 811
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....n section 115BBE of the Income-tax Act, 1961." Assessment Year 2020-21: "In the facts and circumstances of the case, the Learned CIT(A) has erred in holding the excess stock found and admitted during the survey action u/s 133A, as income under the Profit and Gains from Business & profession instead of treating it as "Unexplained investments u/s 69B of the Act" and to tax at special rates given in section 115BBE of the Income-tax Act, 1961." 2. At the outset of hearing, we noted that appeal filed for the A.Y. 2017-18 was delayed by 24 days. The Ld. DR explained the reason for the delay in filing the appeal stating that the concerned officer was busy for completing the works for time barred matters supported by a letter dated 24.12.2024 The reason for the delay is quantum of workload in this office and the time barring matter, which are to be completed in the time bound manner. Further, the undersigned was deputed for the search duty conducted by the Investigation wing of the department on a few occasions which also led to the delay in filing of the appeal. 3. The ld. Dr requested that the delay may be condoned. On the other hand, the Ld.AR had no objection. 4. C....
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....g that the income declared during the course of survey will be treated as business income. The assessee relied on the following cases too. 1) M/s. Travancore Textiles (P) Ltd. in ITA Nos. 3193/Chny/2018 & 176/Chny/2019 2) M/s. Samarath Realities in ITA No. 1144/Ahd/2017 4. Aggrieved from the above order, the revenue filed appeal before the ITAT. 5. The Ld. DR relied on the order of the assessing officer and referred to the statements recorded during the course of survey u/s. 133A and confirmed during the statements recorded u/s 131of the Act on 01/09/2013. The assessee itself(Partner) has declared as undisclosed income and referred to Q. Nos. 3 & 4 which are as under: 6. However, the Ld. CIT(A) has treated as business income instead of income under other source under section 69A of the Act. The assessee has accepted it as undisclosed income during the survey u/s 133A of the Act. It is very surprising that the assessee is not maintaining updated books of accounts to explain the source/application of funds . However, while filing the return of income, it was offered as business income which is complete violation of the statements given by the assessee durin....
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....had carried out survey proceedings u/s 133A of the Income Tax Act, 1961 at the business premises of the Respondent on 30.08.2016, which was extended to Respondent's one more group entity namely M/ s. Mangal Deep Bangles and which resulted in the Survey party noticing certain excess inventory valued at Rs. 18,20,65,300/- as compared to the book stock and also an undisclosed sales amounting to Rs. 7,05,890/- in the case of the Respondent and Rs. 4,61,47,672/- in the case of Mangal Deep Bangles. 3.2 The Respondent assessee had admitted those findings and offered the same to tax as "Income from Business" and also discharged its tax obligations, in its return of Income filed on 07.11.2017 in conformity with the "statement recorded u/s 131 of the Act at the time of survey on 30.08.2016. 3.3 The said return of income was taken up for scrutiny by the learned assessing officer which had culminated with the AO framing the assessment order dated 09.09.2019 treating the additions as "unexplained Income u/s 69A" that too in a mechanical manner with a cryptic one-line/ non-speaking order as under: Quote "Submission made by you on 06.08.2019 and 16.08.2019 ....
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....ooks of accounts and it was quantified in value at Rs.3,23,08,950/- and the AO made addition under section 69B of the Act and applied section 115BBE of the Act. However, the learned CIT(A) has allowed the appeal of the assessee and treated it as a business income after relying on various judgments. We also noted from the Order of the lower authorities regarding the difference in stock found in the business premises of the assessee. It was not found separately elsewhere, the stocks found are the integral part of business activity of the assessee. The learned CIT(A) has relied on the judgment in the case DCIT Vs. Sri Krishna Diamond and Jewellery (supra) in which it has been observed as follows, and has allowed the appeal of the assessee. "9. After hearing rival contentions, we note that the assessee is dealing in gold jewellery, silver articles, diamond, platinum, other precious stones, semi-precious stones and dealing in bullion etc. A survey was conducted on 04/01/2018 and the excess stocks were found of Rs. 2,50,51,072/- . During the assessment AO treated the same as Income from other source and applied sec. 69 of the Act. The CIT(A) has allowed the appeal of the assesse....
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....fore, the investment in the excess stock has to be brought to tax under the head "Business Income" and not under the head "Income from Other Sources" and provisions of Section 69/115BBE would accordingly be not applicable. 14.2 Even in the statement recorded u/s 133A on 04.01.2018 from the appellant at the time of survey u's 133A, the appellant had stated that the extra income offered is over and above the normal profits of the appellant firm and such income declared is to be assessed as business income only. The relevant question no. 26 along with the answers are reproduced as follows; The complete valuation of the gold articles and other articles was done during the course of the survey and the entire valuation report was enclosed herewith as an annexure. As per the valuation report there is excess in various categories of the stock. Table The excess is appearing in the books on some of the categories as shown in the valuation report please comment- Ans: Sir, I agree that the valuation is done by government authorized valuers and also I agree that there is excess gold and silver in some of the categories. The total value of the excess gold ....
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....vey proceedings amounting to Rs. 2,50,51,072/- as unexplained stock and the same is added back to the income under section 69 of the Income tax Act, 1961. The assessing officer has relied on the decisions of Hon'ble High Court of Rajasthan in the case of PCIT Aiwar vs Bajargan Traders in ITA No. 258/2017 dated 12092017 and also on the decision of Hon'ble High Court of Madras in the case of M/s. SVS Oils Mills vs. The Assistant Commissioner of Income Tax in ITA No. 765 of 2018. The Hon'ble High Court of Rajasthan in the case of PCIT Alwar vs Bajargan Traders in ITA No. 258/2017 dated 12-09- 2017 held as follows. 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/JPI15dted 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 unexplaine....
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....separable (mixed) 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 Id. 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 ....
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....y identifiable and related to the regular business stock of the appellant then the investment in excess stock found during the course of survey has to be brought under the head "Business Income" and not under the head "Income from other sources". 9.3 The appellant has relied on the decision of Hon'ble High Court of Rajasthan in the case of PCIT Alwar vs. Bajargan Traders in ITA No. 258/2017 dated 12- 092017 and also on other various judicial decisions. It is seen that the facts of the case under consideration are similar to that of PCIT Alwar vs. Bajargan Traders in ITA No. 258/2017 dated 12-09-2017 (Supra). In the instant case, the appellant is engaged in the business of jewellery. During the course of survey excess stock amounting to Rs. 2,50,51,072/- was found in respect of gold and jewellery. Further, the AO has not identified any source of income apart from the business income of the appellant, to which excess stock found during the course of survey can be attributed. In the given case, the excess stock found during the course of survey proceedings is clearly identifiable and the same is related to regular business stock of the appellant therefore, the same is to ....
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....le Apex Court while dismissing the appeal of an assessee in the case of Roshan Lal Sanchiti 292 Taxman 549(SC) has held that statement recorded during the course of search u/s 132(4) has evidentiary value and if any of the party would like to deviate from such statement then such party has to rebut the disclosure with cogent material. Here in this case the revenue did not want to rely on the statement of the Managing partner. However, the lower authorities have failed to bring on record any material to prove that the cash and additional stock was not the business income of the assessee. Further the AO has also not disturbed the audited books of the assessee. Now the moot question which we have to decide is whether this cash and unexplained stock when offered by the assessee would have to be taxed as business income or as unexplained investment in terms of provisions of section 69A of the Act. Revenue has relied on the decision of Hon'ble Madras High Court in the case of SVS Oil Mills reported in 113 taxmann.com 388 (Mad.) 6.1 Facts before the Hon'ble Madras High Court were totally difference in as much as in that case the proceedings were emanating as a result of s....
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....explained investment u/s. 69B of the Act in absence of necessary explanation with regard to source for said excess stock. Under those facts, the Hon'ble Madras High Court came to the conclusion that excess stock found during the course of survey should be assessed u/s. 69B of the Act. In this case, facts are entirely different. The excess stock found during the course of survey was mixed with regular stock in trade of the assessee in its business. The survey team was also not identified excess stock separately, but was valued because the assessee could not reconcile the difference in stock in trade when compared to book stock. Further, the assessee has explained the source for excess stock and argued that it is out of current year income generated from the business. The explanation of the assessee was not disproved. Therefore, we are of the considered view that the facts of the present case are not applicable to the case laws relied upon to the Assessing Officer" 8. The facts of the present case are perimetria with that of the Chennai Bench in the case of Overseas Leathers (Supra). Therefore, respectfully following the view of the coordinate bench we are of the view th....
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.... and such additional income declared by the assessee on the basis of the same survey conducted on 09.08.2017 has been accepted and no proceedings u/sec.147 or 263 have been initiated. We, therefore, find merit in the submissions of the Learned Counsel for the Assessee that once the Revenue has accepted during assessment year 20172018 that such additional income declared by the assessee has to be taxed at normal rate and not u/sec.115BBE, the Revenue cannot change it's stand and tax the additional amount surrendered during the course of survey by applying provisions of sec.115BBE of the Act. Although the principles of res judicata do not apply to the income tax proceedings, however, once the income is taxed in a particular manner, unless there is change in facts and circumstances of the case, the Revenue should not take a different view for the immediately next assessment year when the income for both the years are declared on the basis of the same survey action and in one year the Revenue has accepted such additional income declared on the basis of survey at normal rate treating the same as business income. In view of the above discussion and in view of the detailed re....
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....and Coordinate Bench. We have gone through the assessment order passed by the assessing officer dated 09/09/2019 which is as under: 11. We noted that from the above assessment order, the assessing officer has made addition u/s. 69A of the IT Act. We also noted that from the financial statements that the closing stocks from assessee is Rs. 17,33,93,820/- and sales of Rs. 26.48 crores. The opening stock is Rs. 3.41 crores and purchases is only Rs. 38.26 crores. However, the undisclosed income was declared by the assessee during the course of survey of Rs. 18,27,71,190/- as unaccounted stock. The ld. CIT(A) should have considered the purpose/ findings/statements recorded during the course of survey-.The ld. CIT(A) has treated as business income only relying on the judgements as per his order without going into the facts/ findings at the time of survey for the impugned Assessment Year of the assessee and has ignored the statements recorded during the survey proceedings and post survey proceedings. The ld. CIT (A) is not justified for allowing the appeal of the assessee. Once the assessee itself (partner) admitted as undisclosed income because he was unable to explain the source of i....
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....g the entire materials available before him, treated the assessee's stock of Rs. 3,27,76,490/- u/s. 69B of Income Tax Act. However, the assessee offered it as business income. The Ld. CIT(A) also treated the income declare during the survey u/s. 133A as business income. The Ld. CIT(A) relied on the judgment of Hon'ble Jurisdictional High Court and the Coordinate Bench and allowed the appeal of the assessee. Aggrieved from the order of the Ld. CIT(A), the revenue filed an appeal. 13. The Ld. DR relied on the order of the assessing officer and statements recorded u/s. 133A, 131 of Income Tax Act and submitted that thee unaccounted stocks were discovered by the income tax department only because of the survey happened. It should have treated it as income u/s. 69B of the Act. 14. On the other hand, the Ld. Counsel relied on the order of the Ld. CIT(A) and submitted that the Ld. CIT(A) has given reasoned order and it should not be disturbed and submitted that in the case of group cases in Mangal Deep Bangles, the assessing officer had accepted as business income then why the assessing officer had treated the income u/s. 69B in the case of the assessee. The Ld. Counsel further subm....
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....-18. 1 need to say here that out of the total stuck of 101157.760 grams, a reduction of 10% of the undisclosed stock has to be made in respect of stones, Impurities. tog weight and certain enamel & wax products and the total value for the undisclosed stock declared by me as income offered for tax is Rs. 19.04.81.604/ -. This entire income I am declaring in the hands of the fitm. Further, the cash book was not updated and was lying with my accountant, the cash found in the business premises may be treated as unexplained cash and i am offering the same for tax for the assessment year 2017-18. Q4. Please give the details of the payment schedule of tax for the above mentioned undisclosed Income. Ans: I have declared a total amount of Rs. 19,04.81,604/- as my firni's income and the taxes would be paid accordingly as and when the installment are due. The first installment of advance tax due for 15" June · 2016 would be 25% of which a part payment of Rs, 7,75.000/- has already been paid and the balance of 50% due upto 15" September would be paid on or before 15" September 2016. The remaining amount would be paid as and when que i.e. 25% by 15" December 2016 and last 25% by 15" March....