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2022 (5) TMI 214 - AT - Income TaxExcess stock found during survey - search conducted u/s 133A - HELD THAT:- Department has found physical stock as on 07.02.2009 more than the stock declared in the books of accounts. Further, we observed that the excess stock found during survey consists of Paper and Board, the same items in which assessee also makes trading business. It clearly shows that the excess stock found is nothing but business stock. We noticed that the AO treated the above excess stock as additional income chargeable to tax under the head income from other sources. In our considered view, the excess stock found during search is nothing but business stock carried on by assessee which is not declared in the books. Since there is a direct nexus with the type of stock found during survey and the business carried on by the assessee, these excess stock in only be treated as chargeable to tax under the head income from business not under the head income from other sources. Accordingly, ground no. 4 raised by assessee is allowed. Excess stock found during survey as part of business stock and accordingly re-computed and claimed the remuneration to partners as per the Section 40(b) - Since, we already adjudicated ground no. 4 in favour of the assessee that the excess stock found during survey is chargeable to tax under the head business income, therefore, the profit determined by the assessee under the head business income is proper and it is fact on record that the assessee is eligible to claim remuneration to the partners as per provisions of section 40(b) of the Act, therefore, the AO cannot deny the benefit available to the assessee as per Section 40(b) of the Act, therefore, we are inclined to allow the ground no. 5 raised by assessee.
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