TMI Blog2021 (1) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is an individual, engaged in the business of wholesale trade of cloth and readymade garments in the name of Srinivasa Enterprises. He is also the partner in the firm, M/s Lucky Retail Stores along with his wife and both of them are having the share of 1/6th each . For the A.Y. 2016-17, the assessee filed the return of income on 17.10.2016 declaring total income of ₹ 13,57,520/-. Subsequently, the 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. The AO found that the proprietor s capital was shown at ₹ 2,06,31,026/- and in the immediate preceding assessment year, it was show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cr. and the same was added to the income in computation statement based on the declarations given at the time of survey. The value of stock was not taken to the firm s Profit Loss account and Balance Sheet and the same was taken to the personal capital accounts of the partners, thus argued that the sale proceeds of the excess stock amounting to ₹ 62.5 lakhs i.e. 1/3rd share consisting of assessee s and his wife s share was taken to the assessee s capital account. The assessee submitted that the increase in capital was only ₹ 61,96,000/- against the receipt ₹ 62.5 lacs which was less than the income admitted, hence explained that no addition is warranted on account of increase in capital. The AO did not find the explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lucky Stores. The assessee along with his wife are partners in the Lucky Stores , each of them having 1/6th share. During the course of survey in the Lucky Stores, the AO found excess stock of ₹ 1.87 Cr. on the basis of gross profit. The excess stock of ₹ 1.87 Cr. was not taken to the Balance Sheet, Profit Loss account and offered the same in the computation of income separately and paid the taxes thereon. Out of ₹ 1,87,50,000/-, cash generated out of the proceeds of such stock was taken by the partners and introduced in the partners capital account. The assessee being 1/6th share holder and including his wife s share it worked out to 1/3rd amounting to ₹ 62,50,000/- which was taken to the assessee s capital ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had admitted the income of ₹ 1,87,50,000/- as excess stock at the time of survey. In response to question No.7, the assessee has admitted excess stock of ₹ 1,87,50,000/- in the firm s hands and which was accepted by the AO in the assessment order passed for the A.Y. 2016-17 u/s 143(3) dated 31.12.2017. Since the assessee has offered the excess stock separately in the computation of income without taking into the books of accounts, the source of ₹ 1,87,50,000/- was available to the partners of the firm in the form of cash or kind, thus, the partners of the firm are free to distribute the sale proceeds of the stock as drawings towards their shares. Accordingly, all the partners of the firm had distributed the sales a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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