TMI Blog2022 (10) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... e a statement that the excess stock was a result of suppression of profit in respect of sales made outside the books of accounts. Therefore, in the present case, investment in excess stock computed by the department is liable to be treated as business income and to be taxed under normal provisions and not under the chapter no XII. In the case of M/S BAJAJ SONS LTD.[ 2021 (5) TMI 956 - ITAT CHANDIGARH] it has been held that provisions of section 115BBE are not applicable where Surrender is made to cover any discrepancy. The action of the lower authorities in invoking provisions of Section 115BBE on the surrender income is perverse to the facts on record and held to be bad in law. AO is directed to compute the said surrendered income under normal provisions as applicable to the business income of the assessee. Appeal filed by the assessee is allowed. - I.T.A. No. 148/Asr/2022 - - - Dated:- 10-10-2022 - DR. M. L. MEENA , ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE , JUDICIAL MEMBER Appellant by : Sh. Rohit Kapoor , C. A. and Sh. V. S. Aggarwal Respondent by: Ms. Amanpreet Kaur , Sr. DR ORDER Per Dr. M. L. Meena , AM : This appeal has been filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the appeal is heard and disposed off. 3. Briefly, the facts on record are that the appellant is an individual engaged in the business of trading of furniture and the appellant had filed return of income for the AY 2019-20 on 30.10.2019 at a total income of Rs. 1727530/- and that a survey operation u/s 133A was conducted on 26.02.2019 and stock of Rs.54,94,959/- was found as against stock of Rs. 48,68,459/- as per Books of Account. Thus, an excess stock of Rs.6,26,500/- was found. The assessment for the Ay 2019-20 was completed u/s 143(3) by invoking the provisions of section 115BBE on excess stock amounting to Rs. 6,26,500/- as alleged by the department. Further, the assessee has also offered Rs. 10,00,000/- on account of noting s in respect of repair to building for which is not under dispute. 4. The appellant has preferred an appeal before the CIT(Appeals) on the limited issue of whether provisions of section 115BBE can be invoked on the alleged excess stock. The CIT(Appeal) dismissed the appeal of the assessee vide order dated 13.10.2021 passed u/s 250(6) on the ground that the assessee has himself offered a sum of Rs. 626500/- in the balance sheet and as such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various cloth items, carpets, curtains and other allied items from the same premises. That during survey operation u/s 133A the inventory of stock of all the concerns were inventoried by the department and the summary for the same is as under: M/s PRABHAT CHAIRS Inventory Stock as inventorized by the department Stock as per books Shortage PB Page no. 1. 545400 4868459 761200 106 2. 113425 107 3. 775390 108 4. 786870 109 5. 75050 110 6. 1811124 111 41,07,259/- 48,68,459/- 7,61,200/- M/s PRAB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not satisfied by the AO. 11. During the hearing, the AR drew the attention of the bench on the fact that the CIT(A) has nowhere contradicted the stand of the assessee that there was actual shortage of stock of Rs 7,61,200/- instead of excess stock of Rs 6,26,500/- as computed by the AO. The AR relied upon the circular issued by CBDT dated 11-4-1955, 14(XL-35) wherein the Board ordered that the officers of the Income-tax should not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist the taxpayers in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard, the officer should take the initiative in guiding a taxpayer, where proceedings or other particulars before them indicate that some refund or relief is due to him. The circular is enclosed at page no. 143-146 of paper book. 12. The Ld. AR further relied upon the circular and argued that department should freely advise the assessee, when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. It may be true that the Circular is of the year 1955. Nevertheless, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18: - As per physical verification taken at your premise, it has been found that stock of Rs 54,94,959/- is found. Please explain the difference Rs 6,26,500/- with documentary evidence. Answer: - Sir, I am not able to explain the reasons of difference in stock. This may be unaccounted purchase which was not recorded in the books of accounts. The purchase may be also made from unaccounted sales. I have no documentary evidence in this regard. Please refer page No 120-121 Question 23: - I am again asking you, please explain the difference of excess stock found to the tune of Rs 6,26,500/- in M/s Prabhat Chairs? Answer: - I am unable to explain the differences in stock to the tune of Rs 6,26,500/-. However, in order to buy peace of mind and to avoid litigation with the department, I voluntarily offer additional income of Rs 6,26,500/- over and above normal business income for the FY 2018-19 relevant to AY 2019-20. This income will be shown in the return of income of M/s Prabhat Chairs for the AY 2019-20 and undertake to pay the due taxes as per the provisions of the Income Tax Act,1961. 16. It is evident from the record that the excess stock found during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT Central-III vs Hitashi Estates , 178 Taxmann 221. Therefore, the provisions of section 115BBE cannot be invoked in the present case as no excess stock was actually found. 19. Under the facts and circumstances of the case, the applicability of provisions of section 115BBE are not relevant in the present case as no excess stock was found. Even otherwise the provisions of section 115BBE cannot be made applicable particularly where the assessee has made a statement that the excess stock was a result of suppression of profit in respect of sales made outside the books of accounts. Therefore, in the present case, investment in excess stock computed by the department is liable to be treated as business income and to be taxed under normal provisions and not under the chapter no XII. 20. In the case of M/S BAJAJ SONS LTD. VERSUS THE DCIT , CENTRAL CIRCLE-III LUDHIANA 2021 (5) TMI 956 it has been held that provisions of section 115BBE are not applicable where Surrender is made to cover any discrepancy. 21. Considering the factual matrix and judicial precedent cited, the action of the lower authorities in invoking provisions of Section 115BBE on the surrender income is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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