TaxTMI 
TaxTMI 
2025 (1) TMI 1847
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....of Rs. 50 lakhs was seized from the assessee by the Election Flying Sqad Team, Mancherial while conducting patrolling duty on 03/12/2018. Consequently, a warrant U/s. 132A of the Income Tax Act, 1961 ("the Act") was executed and the cash was requisitioned from the Police Authorities, Macherial. In the statement recorded U/s 131 of the Act dated 4/12/2018 the assessee stated that the cash belonged to him and that the sources of the case were withdrawals made from various bank accounts for the past two months, advances from various customers received in respect of his business venture viz., Kruthika County and agricultural income etc. Subsequently, notice U/s 153A of the Act dated 3/12/2018 was issued and in response to the notice, the assessee filed the return of income on 11/02/2021 admitting a total income at Rs. 40,50,490-/-. During the course of assessment proceedings, the learned Assessing Officer called upon the assessee to explain the sources for cash found and seized on 3/12/2018 and also to file necessary evidence. In response, the assessee submitted the details of source for cash found and seized during the course of election to the extent of Rs. 12,45,00....
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....e is a cheque issued in the name of the person but not cash withdrawn and therefore, rejected the explanation of the assessee and sustained the addition to the extent of Rs. 3 lakhs. 5. Insofar as levy of tax @ 60% U/s. 115BBE of the Act, the learned CIT (A) observed that the assessee claimed to have generated income out his business activities but, failed to substantiate the claim along with relevant evidence and therefore, mere furnishing of the Return of Income for earlier assessment years in the form of ITRs does not prove the assessee's claim of carrying out the business activities and therefore, the learned CIT (A) opined that there is no error in the reasons given by the learned Assessing Officer to assess the income declared by the assessee as unexplained money taxable U/s. 69A r.w.s 115BBE of the Act. 6. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: 1. "The order passed by the Ld. CIT (A) allowing the appeal of the appellant, only in part, is incorrect and cannot be sustained in facts and in law. 2. The Ld. CIT (A) erred in sustaining the addition to the ....
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....) 107 ITR (Trib.) 0688 (Chennai). 9. The learned Departmental Representative, Dr. Sachin Kumar, on the other hand, supporting the order of the learned CIT(A), submitted that the assessee could not explain the source for cash found and seized with known source of income and corresponding evidences, although the assessee claims to have withdrawn Rs. 3 lakhs from bank account. But, the learned CIT (A) has recorded a categorical finding that the amount of Rs. 3 lakhs has been paid to some person. Further, as per the provisions of section 69A of the Act, wherein in any financial year, the assessee found to be the owner of the any money, which is not recorded in the books of account and, the assessee offers no explanation about the nature and source of such money, then, the same needs to be taxed U/s. 69A of the Act as unexplained money and thus, the learned Assessing Officer and the learned CIT (A) have rightly assessed U/s. 69A r.w.s 115BBE of the Act and therefore, the order of the learned CIT (A) should be upheld. 10. We have heard both the parties, perused the material available on record and gone through the orders of the Authorities below. There is no dispute wit....
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....ted on 14.03.2018 and during the course of survey, inventory of physical stock was taken which resulted in detection of excess physical stock of Rs. 5.08 crores. A statement u/s. 131 of the Act was recorded from the managing partner of the assessee Mr. M. Srinivasa Reddy, where he had, in response to a specific question admitted that excess stock found during the course of survey is acquired out of unaccounted income generated from the business for the current financial year. The assessee had admitted a sum of Rs. 5.08 crores towards excess stock found during the course of survey under the head profits and gains from business and profession and also paid taxes. These are undisputed facts. The only dispute is with regard to head of income under which additional income offered towards excess stock to be assessed, whether it is under the head profits and gains of business or profession or unexplained investment as per section 69B of the Act. 11. The provisions of section 69B of the Act deals with, where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article and the Assessing ....
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....the course of survey or during the assessment proceedings is not negated with any other evidences to disprove the claim of the assessee that source for acquisition of stock in trade is other than business income of the assessee. Moreover, the assessee derives only one source of income from manufacturing and trading in leather and allied products, which is evident from income declared for the impugned assessment year and earlier assessment years. Further, when the assessee has explained source for excess stock found during the course of survey, is out of income earned from current year business, the AO did not go further to disprove the claim of the assessee that said source is not from income from business. Moreover, it is a general practice in trade that income generated is either ploughed back into the business in the form of stock in trade or receivables or spent for other purpose like acquisition of asset outside the business. In this case, during the course of survey except stock difference, no other investment with any other asset was found. Therefore, from the above it is very clear that explanation offered by the assessee that source for excess stock is out of income genera....
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.... identical issue and held that when excess stock found during the course of survey is related to stock in trade dealt by the assessee, then investment in procurement of such stock is clearly identifiable and related to regular business stock of the assessee and thus, said investment in excess stock has to be brought to the tax under the head business income and not under the head unexplained investment. The relevant findings of the Hon'ble High Court are as under: "3. The Tribunal while considering the matter has observed as under:- "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/JP/15 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 Bu....
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....rticular 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 ld. 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 profit/loss account since the said ....
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.... Sassoon & Co. & Ors. vs. CIT (1954) 26 ITR 27 and Godhra Electricity Co. Ltd. vs. CIT (1997) 225 ITR 746 where it was held that only real income can be taxed, hypothetical income cannot be taxed nor income can be taxed in vacuum. Therefore, the addition made by the AO is not as per law and the same be deleted. The ld. CIT (A) has confirmed the addition by stating that it is the disallowance of interest. It is submitted that the lower authorities have not disputed about the commercial expediency about the advance given to Smt. Rita Gupta. In fact, the advance was given to Smt. Rita Gupta in earlier years for construction of godown and the same was given on rent by the assessee. Therefore once commercial expediency for giving the advance is established, no part of the interest expenditure can be disallowed in view of the decision of Hon'ble Supreme Court in case of S.A. Builders 288 ITR 1 and Hero Cycles Pvt. Ltd. vs. CIT 379 ITR 347 where it was held that the Revenue cannot justifiably claim to put itself in the arm- chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circums....
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..../12/2018 the appellant issued a cheque in the name of Jadi Rajeswar but not a self-chque withdrawn from the bank. Therefore, we are of the considered view that the assessee could not explain the source to the extent of Rs. 3 lakhs as confirmed by the learned CIT(A), even before us. Therefore, we are inclined to uphold the reasons given by the learned CIT (A) to sustain the additions made by the learned Assessing Officer to the extent of Rs. 3 lakhs found and seized on 03/12/2018. Further, in respect of taxability of the same amount, since we have already taken a view that the assessee is into the business and deriving income from business regularly and even for earlier assessment years, the additions made by the learned Assessing Officer and sustained by the learned CIT (A) should be treated as 'income from business and profession'. Accordingly, we direct the learned Assessing Officer to assess the addition made for Rs. 3 lakhs under the head 'income from business and profession' and levy tax at normal rate of taxes. 13. In the result, appeal filed by the assessee for the AY 2019-20 is partly allowed. ITA No. 1203/Hyd/2024 (AY: 2020-21) 14. Brief fa....
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....ed CIT (A) dismissed the appeal of the assessee and sustained the addition made by the learned Assessing Officer U/s. 69A of the Act. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: "1. The order of the Ld CIT (A) is incorrect and cannot be sustained on facts and in law. 2. The Ld. CIT (A) erred in sustaining the addition to the extent of Rs. 38,50,000/-. 3. Any other ground that may be urged at the time of hearing." 16. The learned Counsel for the assessee, Sri A.V. Raghuram, referring to the financial statements filed along with the return of income, submitted that the total cash deposits into the bank account were treated by the learned Assessing Officer was Rs. 38,50,000/-. As against this, the assessee has declared total sales of Rs. 92,62,000/- for the Financial Year 2019-20 relevant to the Assessment Year 2020- 21. Even after considering the total business turnover of the assessee, the cash deposits from business, ie., from sales, is almost three times of cash deposits. The assessee has explained the cash deposited into bank account out o....