TMI Blog2011 (8) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... DGMENT Satish K. Agnihotri J.- 1. The instant appeal filed under section 260A of the Income-tax Act, 1961 (for short "the Act, 1961"), is against the order dated July 15, 2003 (annexure A/2), passed by the Income-tax Appellate Tribunal (for short "the ITAT"), in I. T. A. No. 348/Nag/2001 (the assessment year 1998-99) (ITO v. Dhanush General Stores). 2. The appeal was admitted on the following substantial questions of law : "(i) In the facts and circumstances of the case whether the Income-tax Appellate Tribunal was justified in treating the surrendered income as deemed income under section 69B and not treating it as income from business particularly in the absence of such deeming provisions in survey operations, as are avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Rs. 89,000. 5. The assessing authority came to the conclusion that the assessee has surrendered the amount of Rs. 88,918 as excess stock, however, the asses-see did not disclose the surrendered amount in its return of the income. Thus, it became the income for the year 1997-98 under the provisions of section 69 of the Act, 1961, and also a penalty was initiated separately under section 271(1)(c) of the Act, 1961. 6. The Assessing Officer held as under : "These credits are appearing in the books of account for which no description as regard to from whom money on account of credits have been received also there is no mention in the ledger regarding these transactions. The practice followed by the assessee is that the assessee use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash of Rs. 1,94,088 and since no satisfactory explanation is offered, a sum of Rs. 1,75,088 is being added to the total income of the assessee. For concealment of income penalty proceedings under section 271(1)(c) are separately initiated." 7. Thereagainst, an appeal was preferred before the Commissioner of Income-tax (Appeals). The Commissioner (Appeals), vide order dated May 24, 2001 (annexure P/7) deleted the addition of Rs. 88,918. The relevant portion of the said order reads as under : "The total effect of enhancement of expenditure under the above heads was the reduction of net profit by Rs. 34,500. It appears that in the absence of reflection of the entire value of the excess stock found during survey in the income returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of survey because the assessee was not able to explain the source of investment in the excess stock, therefore, the investment was to be taxed as the assessee's income under the deeming provisions of section 69B of the Act. It was held that this was not a business income as it was not taken directly to the computation of income but in the trading account or the profit and loss account only. 10. We have heard learned counsel appearing for the parties, perused the pleadings, orders and the documents appended thereto. 11. It is crystal clear that the assessee had shown the surrendered income in the trading account or profit and loss account, but not in the computation of income. Thus, it cannot be held as business income, as if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year." 14. If there is undisclosed investment in bullion, jewellery of other valuable articles, which are not fully disclosed in the books of account the case would fall under the ambit of section 69B of the Act, 1961. In the case on hand, there was excess stock, which can be held as unexplained investment, not invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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