2021 (1) TMI 406 - ITAT VISAKHAPATNAM - Income Tax

Head Note / Extract:
Unexplained income - case was selected for limited scrutiny and a notice u/s 142(1) was issued to the assessee calling for information to examine whether the share capital was genuine and from disclosed sources or not - survey u/s 133A was conducted in the business premises of the M/s Lucky Stores wherein assessee along with his wife are partners each of them having 1/6th share - HELD THAT:- During the course of survey, excess Stock was found, which was offered as additional income directly in the computation but not taken by the assessee in the books of accounts of the firm. The assessee also paid the VAT for sale of excess stock. The assessee has also paid the income tax in the hands of the firm. The admission made by the assessee in the firm was accepted by the AO. All the partners of the firm had distributed the sales and taken to their personal balance sheets. In the same manner, the assessee also has taken the share of his income generated out of the excess stock found during the course of survey and brought to his capital account. The assessee filed paper book with regard to two other partners, wherein, the department has completed the assessment u/s 143(1) without making separate addition on account of excess stock distributed by the partners. During the appeal hearing, the Ld.AR submitted that the department has not taken any action and not made any addition in respect of other partners. Since the assessee has admitted the additional income on account of excess stock and the said excess stock was not reverted back to the books of accounts of the firm, we are of the view that the assessee has rightly taken the sale proceeds to their individual capital accounts. Once, the assessee has admitted the additional income, the said income is available to the assessee in the form of cash or kind which the assessee is permitted to take as source for application of funds. Thus, the assessee explained the source for credits in the capital accounts and there is no unexplained investment required to be brought to tax. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.