TaxTMI 
TaxTMI 
2023 (8) TMI 1684
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....ly declared in the return of income was business income subject to normal rate of tax? iii) Whether on the facts and circumstances of the case and in Law, the CIT(A) was correct in considering the investment in excess stock as business income of the assessee when the assessee had not brought anything on record to prove the source of such investment? iv) Whether on the facts and circumstances of the case and in Law, the CIT(A) was correct in holding that the onus was on the AO to show that the excess stock found during the course of Survey U/s 133A and admitted by the assessee, was not relating to its normal business?" 2. The brief facts of the case are that a survey was carried out at the business premises of M/s Sri Krishna Diamonds and Jewellery on 04/01/2018 at its registered address at No.1, Kamaraj Road, Commercial Street, Bangalore-560 001. The case was selected for compulsory scrutiny and statutory notices were issued to the assessee. During the course of assessment proceedings, the AO noted that on the basis of survey, it was found that there was excess stock with regard to gold and gold ornaments of 3756.50 grams, precious stones of 36.9 cent and silve....
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....ce, sec. 69 will not be attracted and the regular tax due has been paid. From the submission made by the assessee, the AO was not satisfied and he applied sec. 69 after discussing in detail and relying on some case laws, it was concluded that the excess stock found during the course of survey amounting to Rs.2,50,51,072/- was unexplained stock and the same was added back to the income of the assessee u/s 69 of the Act. 4. Aggrieved from the above order, the assessee filed appeal before the CIT(A). The ld. CIT(A) after examining the details and relying on the case laws, allowed the appeal of the assessee. 5. Aggrieved from the order of the CIT(A), the Revenue has filed appeal before the ITAT. 6. The ld. DR relied on the order of the AO and submitted that during the course of survey proceedings on 04/01/2018, the survey team found excess stock of jewellery, which were not recorded in the books of accounts of the assessee. Therefore, the AO has rightly applied sec. 69 of the IT Act. She also submitted that mere relying on the books of account subsequently without any corroborating evidences to support such entries and offering the same to tax in the return of income after the....
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....lion 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 assessee by observing that the AO has not pointed out that the excess stock has any nexus with any other receipts. After discussing in detail and considering on the some judgments, he found that the assessee is engaged in jewellery business as noted supra and no other business is carried out by the assessee. We note that the assessee has stated that excess stock is kept in the premises and it was not recorded in the books of accounts. As per the submission of the ld. AR, after the survey, the assessee has made necessary entries in its books of account and offered it as regular business income. The answer to question No.26 in the statement recorded is very much clear that the assessee has offered it as excess stock of its business assets. The AO has not further established that the excess stock found was not in the nature of business assets/income and also not pointed out any adverse information that it is not regular business income. The CI....
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....wn 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 present in the premises comes to Rs. 1,00,11,072/-. Further as per the books the total silver articles present in the premises as per the books is 25,43,499.000 grams in addition, there is an excess of 376 kgs of other as kept in the premises as per the valuation report which is not accounted in. 14.3 Thus, it is clear from answer to question 26 from the statement recorded at the time of survey that the income declared is on account of excess stock found in the business premises of the appellant and accordingly appellant had declared extra income in the form of excess stock of gold jewellery and silver articles under the head Income from Business only. 15 In this regard the appellant would like to rely upon several Judicial precedents wherein it has been held that income declared under survey proceedings are to be assessed as Business income only and not as Income from other sources and consequently the provision of Sectio....
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....n of Co-ordinate Bench in case of Shri Ramnarayan Birla (in ITA No. 482/JPI15 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 investment surrendered by the assessee under the head "income from Business" ignoring the decision of the Hon'ble Gujarat High Court in the case of Fakir Mohd. Hazi Hasan 247 ITR 290 that unaccounted income ought to be categorized under the residuary head of 'Income from other sources. In respect to the said issue, the findings of the Coordinate Bench are as follows: "We have heard the rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that 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 jewellery. The Coordinate Bench in the case of Choksi Hiralal Mangnlal vs. DCIT 131, TT) (Ahd.) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset ha....
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....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 account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assesse....