TMI Blog2020 (12) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... e revision u/s 263. This view is supported by the decision of Hon ble jurisdictional High Court in the case of Spectra Shares and Scrips (P) Limited [ 2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT] held that merely because of difference of opinion, Pr.CIT cannot invoke his powers u/s 263 . As decided in G.V.R. ASSOCIATES VERSUS INCOME-TAX OFFICER [ 2017 (4) TMI 393 - ITAT VISAKHAPATNAM] estimation of the net profit is one of the permissible methods of assessment of income from business. AO had taken a conscious decision of estimating the net profit from business after considering the nature and complexity of the books of account maintained by the assessee. Once AO had taken a conscious decision and acted in accordance with law and made the assessment, the same could not be branded as erroneous by the Commissioner, simply because according to him, the Assessing Officer should have made further enquiries. - Decided in favour of assessee. - I.T.A.No.138/Viz/2020 - - - Dated:- 23-11-2020 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Shri M.V.Prasad, AR For the Respondent : Shri D.K.Sonowal. CIT, DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that taxing the business income as per section 115BBE is against the provisions of law. The Ld.Pr.CIT considered the argument of the assessee and rejected the explanation of the assessee. The Ld.Pr.CIT viewed that having admitted the income as other operating income for which there was no source or explanation, the assessee cannot come up with the plea that there was no excess stock. The assessee never objected the correctness of the valuation of stock either during the course of search or during the course of assessment proceedings and admitted the same as additional income. The Ld.Pr.CIT has further found that the AO taxed the income @30% without invoking the provisions of section 115BBE which is nothing but lack of enquiry. Hence, the Ld.Pr.CIT viewed that the excess stock found during the course of search required to be brought to tax u/s 69 applying the tax rate @60% as provided u/s 115BBE of the Act. Failure to invoke the provisions of section 115BBE of the Act without making enquiry is erroneous and prejudicial to the interest of the revenue, thus revised the assessment order and directed to AO to tax the income of ₹ 4,41,45,430/- @60% in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was valued at ₹ 4,41,46,445/-. The said amount was voluntarily admitted by the assessee as additional income representing business income, but not as unexplained investment u/s 69 of the Act. The AO also completed the assessment accepting the income admitted by the assessee. Referring to page No.96 of the paper book, the Ld.AR argued that the sum of ₹ 4,41,46,445/- was admitted as additional income under the head Other Operating Income which is nothing but business income. Referring to page No.13 of the paper book, the Ld.AR submitted that the AO had issued the detailed show cause notice calling for the explanation of the assessee as to why the sum of ₹ 4,41,46,445/- should not be brought to tax as undisclosed income u/s 69 applying the provisions of section 115BBE of the Act and the assessee furnished the reply which is placed in page No.18 to 22 of the paper book. The assessee had explained that the additional income ₹ 4,41,46,445/- was admitted in Schedule L under the head other operating income in the relevant columns of the Profits and Gains of the Business in Part A of the return filed for the impugned assessment year. He also explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 115BBE are applicable or not and taken a conscious decision that the income is business income, thus taxed the income @30%, treating the same as business income. After considering the case laws relied upon by the assessee and the facts submitted by the assessee, there is no case for revision u/s 263, hence requested to quash the order passed u/s 263 of the Act and allow the appeal of the assessee. 4. Per contra, the Ld.DR submitted that in the instant case, search u/s 132 was conducted and during the course of search, excess stock of ₹ 4,41,45,430/- was found for which the assessee could not offer explanation, therefore, the AO ought to have assessed the same as unexplained income u/s 69 of the Act and brought to tax u/s 115BBE of the Act. Since the AO failed to make proper enquiries, the Ld.Pr.CIT rightly invoked the provisions of 263 of the Act, hence submitted that no interference is called for. The Ld.DR vehemently supported the orders of the Ld.Pr.CIT passed u/s 263 of the Act. 5. We have considered the rival submissions and gone through the orders of the lower authorities. In the instant case, search u/s 132 was conducted and excess stock of ₹ 4,41,45,43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of NON-FCV stock as we purchase unmanufactured tobacco like Air cured, Sun-dried tobacco, there can be variation in the stock due to quality, humidity, weighment handling losses and other process losses etc Since, the stock was inventorised in the month of September i.e., in the rainy season, there could be some variation due to weight because of accumulation of humidity However, as inventoried by the investigation team and quantified by them, company in order to purchase peace has surrendered the above amount as income of the company. Accordingly, company has brought excess stock value to the books of account by passing the necessary entries in the P L Account as well. An amount of ₹ 4,41,46,445/- was accordingly admitted as 'other income' in Schedule L - 'other operating income' and the same was also shown in the return filed in the relevant columns under the head Profits and Gains of the Business in Part A of the Return filed for the impugned year. The same can also be verified from the P L Account as well as from the Return filed. Copies, of the above were already filed wi th your goodself on 17/12/2018. Thus, it is submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alal Maganlal vs DClT (45 SOT 349), the ITAT has held that in the in the instant case, excess stock found during the survey was not separately and clearly identifiable but it is part of mixed lots of stock found at the premises which included declared stock as per the books and also excess stock as computed by the survey officer, the provision of Section 69(2) could not be made applicable as primary condition for invoking the provisions of Section 69A, 69.8 is that the asset should be separately identifiable and it should have independent physical existence of its own. - Since, the excess stock was a result of accumulation of profit from business over the years and had not been kept identifiable separately but was part of overall physical stock found, the investment in the excess stock had to be treated as business income . In the case of ITO vs Micro Marbles Private Limited (66 SOT 76), it was held that the incomes surrendered by the Assessee at the time of survey accounts to excess stock would definitely be related to business of Assessee. In that case, the Assessing Officer has assessed GP which was upheld by the ITAT. This indicates the excess stock to be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck was found in the course of search which was correctly offered under, the head Income from Business Having regard to the above, we request you not to treat the Additional Income offered of ₹ 4,41,46,445/- under Profits and Gains from Business or Profession once again as Investment u/s 69 B of the Income Tax Act, 1961 and not to tax as per the provisions of section 115 BBE. From the explanation offered by the assessee, it is observed that excess stock found during the search/survey is permitted to be assessed under the business income as well as unexplained investment under section 69 of the Act. The AO considered the explanation of the assessee and assessed the income as business income, but not made the addition u/s 69 of the Act. Thus, it is established that the AO caused necessary enquiries after satisfying himself that the income representing the excess stock required to be brought to tax as business income, but not u/s 69 of the Act, completed the assessment proceedings. The Ld.Pr.CIT taken a different view and held that the excess stock required to be brought to tax u/s 69 of the Act, thus, on the same issue, on which the AO located the excess stock represe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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