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2019 (9) TMI 859 - AT - Income TaxExcess stock found from seized documents during search - Unexplained investment - HELD THAT:- Physical verification of stock was carried out by the assesese-company on its own as a matter of internal control in the month of January and February, 2015 well before the search and the surplus stock found on such physical verification having been accounted for by the assessee-company in its books of account in the month of March, 2015 itself, the same, in our opinion, cannot be treated as unexplained investment of the assessee, which is chargeable to tax under section 69. The amount in question representing excess stock found on physical verification carried out by the assessee-company on its own well before the search action and duly accounted for in the books of account of the assessee-company constituted its business income. As noted by the CIT(Appeals) AO himself in the case of M/s. Industrial Safety Products Pvt. Limited, a sister concern of the assessee had brought to tax the value of similar excess stock in identical facts and circumstances as regular business income of the assessee. We, therefore, find ourselves in agreement with the CIT(Appeals) that the value of surplus stock in the facts and circumstances of the assessee’s case did not represent assessee’s unexplained investment under section 69 and it constituted its regular business income for the year under consideration. Set off current year’s business loss against the income on account of surplus value of stock - HELD THAT:- We also agree with the alternative basis given by the CIT(Appeals) for giving relief to the assessee by holding that the assessee was entitled to set off current year’s business loss of ₹ 1,17,55,657/- against the income on account of surplus value of stock even if it is presumed for the sake of argument that the same was assessable under section 69 as the same is duly supported by the decision of the Hon’ble Madras High Court in the case of CIT –vs.-Chensing Ventures [2007 (4) TMI 204 - MADRAS HIGH COURT] and CIT – vs.- Shilpa Dyeing & Printing Mills (P) Limited [2015 (7) TMI 691 - GUJARAT HIGH COURT] The prohibition against allowing such set off was statutorily provided by the Finance Act, 2016 w.e.f. 1st April, 2017 and there was thus no such prohibition or restriction in allowing the claim of the assessee for the set off for the year under consideration, i.e. A.Y. 2015-16. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) giving relief to the assessee - Decided against revenue
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