2026 (2) TMI 874

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....s 143(2) of the Act was issued and served on the assessee. Subsequently the Assessing Officer issued notice u/s 142(1) of the Act along with a questionnaire in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. During the course of assessment proceedings the Assessing Officer noted that during the course of survey proceedings the valuation of stock present in the business premises of the assessee was performed and additional stock of Rs. 9,25,37,493/- was detected being the difference between the stock as per valuation report and that as per the books of account. Out of the said amount, the assessee submitted party-wise details received for approval amounting 11335.560 grams valued at Rs. 4,15,96,578/-. The assessee accordingly admitted that the stock amounting to Rs. 4,42,86,847/- is his excess stock. The assessee declared that this excess stock of Rs. 4,42,86,847/- is his additional income over and above the regular income for financial year 2019-20 relevant to assessment year 2020-21. 4. The Assessing Officer on perusal of the profit and loss account submitted by the assessee during the cours....

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....ed 25.03.2021 says the survey declaration is on account of unaccounted sales and therefore this is an afterthought. He further noted that during the course of assessment proceedings the assessee did not provide any supporting documents to prove that the survey declaration was on account of unaccounted sales and not unaccounted stock. He, therefore, issued a show cause notice asking the assessee to explain as to why the additional stock detected during the course of survey proceedings u/s 133A should not be treated as undisclosed investment u/s 69 of the Act and why it should not be taxed as per provisions of Section 115BBE (1)(a) of the Act. The assessee in response to the same relying on various decisions submitted that the excess stock declared during the course of survey cannot be brought to tax by applying the provisions of section 69B r.w.s. 115BBE of the Act. 7. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. Distinguishing the various decisions relied on by the assessee and following certain other decisions, he treated the undisclosed stock detected during the course of survey proceedings u/s 133A of the Act amounting to Rs. 4....

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.... the circumstances of the case and in law, the Ld. CIT(A) is not justified in restricting the disallowance at 10% of Rs. 2,83,490/- made on account of sales and promotion expenses instead of upholding the complete disallowance of expenses as the assessee failed to substantiate his claim of expenses with necessary documentary evidences. iii) On the facts and the circumstances of the case and in law, the Ld. CIT(A) is not justified in restricting the disallowance at 10% of Rs. 2,90,520/- made on account of meal expenses instead of upholding the complete disallowance of expenses as the assessee failed to substantiate his claim of expenses with necessary documentary evidences. iv) On the facts and the circumstances of the case and in law, the Ld. CIT(A) is not justified in restricting the disallowance at 10% of Rs. 8,68,741/- made on account of vehicle related expenses instead of upholding disallowance of expenses made by the AO at 15% of Rs. 8,68,741/-, as the assessee failed to substantiate his claim of expenses with necessary documentary evidences. v) The appellant craves to add, amend, alter or delete the above grounds of appeal during the course of appel....

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....e Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, 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". In the result, ground No. 1 of the assessee is allowed". 4.7 The facts in the present case are similar to that in the case of Bajrang Traders (supra) except the nature of stock - in the case of Bajrang Traders, the stock was of rice, whereas in the present case of the appellant, the stock was Gold, Silver and Daimond. 4.8 Further, the Hon'ble Jurisdictional Pune Tribunal in the case of Vijay Shriram Gundale (supra) (order dated 03.08.2025), relying on the ratio laid down by the Hon'ble Rajasthan high court in the case of Bajrang Traders (supra), held that the excess stock found during the course of survey is taxable under the head of business income and provisions u/s. 115BBE of the Act are not attracted on it. 4.9 Further, the Hon'ble Jurisdictional Pune Tribunal in the case of Shri Balaji Ramchandra Ande (supra), relying on various decisions of the Hon'ble Jurisdictional Pune Tribunal and....

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....ration made for excess stock found and excess expenditure. The grounds raised by the Revenue are accordingly dismissed." 4.10 As noted above, in the present case also, the assessee had made disclosure of unaccounted expenditure to the extent of Rs. 53,06,000/- for AY 2019-20 during the survey and the same was also disclosed in the return of income filed for AY 2019- 20 as an additional sale and taxed at normal rate and not u/s. 115BBE. The returned income was accepted by the AO in the assessment order passed on 21.09.2021 for the AY 2019-20.Thus, the facts in the present case are similar to that in the case of Shri Balaji Ramchandra Ande (supra) 4.11 There are judgements which held that the surrendered income is taxable under the provisions of section 68, 69, 69A to 69D of the Act such as the decision of Hon'ble Gujrat High Court in case of Fakir Mohmed Haji Hasan vs CIT 120 TAXMAN 11 (Gujarat), the decision of Hon'ble Punjab and Haryana High Court in case of Kim Pharma Pvt Ltd vs. CIT [2013] 216 Taxman 153 (P&H), the decision of Hon'ble Madras HC in case of M/s. SVS Oils Mills vs. ACIT [2020] 113 taxmann.com 388 (Madras), the decision of the Hon'b....

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....on by the assessee. Since the excess stock was declared in the form of gold, silver and diamond and there is no other business activity carried on by the assessee other than the jewellery business, therefore, we find merit in the arguments of the Ld. Counsel for the assessee that the source of excess stock found is nothing but out of the business receipts. 14. It has been held in various decisions that when the assessee surrenders income on account of excess stock found during the course of survey u/s 133A or search and no other activities other than the same business activities are carried on by the assessee during the year under consideration, then such income declared by the assessee shall be taxed under the head 'business income' only and not as undisclosed investment and the provisions of section 69B r.w.s. 115BBE of the Act cannot be applied. Since the Ld. CIT(A) while deciding the issue has followed the decision of Hon'ble Rajasthan High Court in the case of Bajrang Traders (supra) and the decision of the Coordinate Bench of the Tribunal in the case of DCIT vs. Shri Balaji Ramchandra Ande vide ITA No.625/PUN/2024 order dated 12.01.2025 for assessment year 2018-19 (supra),....