TMI Blog2022 (1) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... se he was not satisfied with the book results, he has to first find error/mistake in the books of account, give detailed finding on it, and then should have re-casted the trading account. The manner in which the Ld. AO has made addition is not justified and thus Ld. CIT(A) has rightly deleted the addition by accepting book results shown by the assessee. AO has also not given weightage to the fact that once the excess stock has been debited in the Profit and Loss Account then the unsold stock as on 31st March 2015 also forms part of the closing stock which is to be valued as per the method regularly adopted by the assessee. We, find no reason to interfere in the finding of Ld. CIT(A) deleting the impugned addition made by the ld. AO and has also holding that the provisions of section 115BBE of the Act are not applicable on the assessee since the income declared during the course of survey is a business income . Accordingly all three grounds of appeal raised by the revenue are dismissed. - ITA No.644/Ind/2019 & 645/Ind/2019 (Assessment Year: 2015-16) - - - Dated:- 30-9-2021 - HON BLE RAJPAL YADAV, VICE PRESIDENT AND HON BLE MANISH BORAD, ACCOUNTANT MEMBER Revenue by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the CIT(A) was justified in treating the excess cash found and surrendered during the course of survey as business income without appreciating the fact that the excess cash of ₹ 8,55,607/-, surrendered during the course of survey, was income from undisclosed sources and the same was not recorded in the regular books of accounts? (iii) Whether on the facts and in the circumstances of the case, the CIT(A) was justified in holding that the provisions of section 115BBE of the LT. Act, 1961 would not be applicable in the assessee's case as the provisions of subsection (2) prohibit the assessee from claiming any deduction in respect of expenditure or allowance. These provisions are effective from 01.04.2013. The further amended provision was inserted only in respect of set off of any loss with effect from 01.04.2017? 2. As the issues raised in these appeals are common and relate to assessee s of same group, at the request of all the Vijay Kumar Surana Rajendra Kumar Surana parties these appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. 3. Brief facts as culled out from the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unsold stock out of the excess stock declared at the time of income tax survey. However, Ld. Assessing Officer was not convinced with the way of disclosing the excess stock in books. He was of the view that the entry of excess stock in the trading account and credit entry showing undisclosed income appearing in the profit and loss account should be removed as it is not a business income and the alleged amount should be directly added to the total income of the assessee as Income from other sources . He also observed that by making these changes in the trading account the net profit from the business will comes to ₹ 2,11,37,081/- and the income from other sources would be ₹ 4,00,00,043/- and after allowing the deduction under chapter VIA at ₹ 1,50,000/- the Ld. Assessing Officer assessed the income at ₹ 6,09,87,124/- . 6. Aggrieved assessee preferred an appeal before the ld. CIT(A) who after examining the facts and the judicial pronouncements concluded that the Ld. Assessing Officer has not rejected books of accounts and the assessee has rightly disclosed the excess stock and excess cash in hands in the books as is generally done by other assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh of ₹ 9,84,843/- and also has challenged the finding of Ld. CIT(A) holding that provision of section 115BBE of the Act are not applicable. 10. We observe that survey action u/s 133A of the Act was carried out at the business premises of the assessee on 02.03.2015 and excess cash of ₹ 9,84,843/- and excess stock of ₹ 3,90,15,200/- was found by the survey team. Apart from the excess cash and excess stock no other incriminating material was found. The excess stock was part of the total stock kept at the assessee s premises and is entered in the books and shown on debit side the trading account. The total of excess stock and excess cash is ₹ 4,00,00,043/- and has been shown on credit side in the Profit and Loss A/c. The assessee has incurred loss during the year and the gross loss is ₹ 9,30,341/-. The closing stock as on 31st March, 2015 is shown at ₹ 8,31,42,600/- which also includes the unsold stock out of the excess stock declared at the time of income tax survey. Ld. AO has questioned the manner of disclosing the undisclosed income. Ld. AO has treated the total undisclosed income as income from other sources liable to be taxed separately and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und included as part of the closing stock amount to ₹ 19442569 in the profit/loss: account: since the said stock of rice was not solei out. In addition ITA 142 to 146/Jodh/2018 Vasu Singhalvs ITO with 4 Ors cases to the purchase and the closing stock, the amount of ₹ 7004814 also found cre4it~d in the profit and loss account as income from undisclosed sources The net effect: of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part: of the recorded stock which can be subsequently sold out and profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment: which has gone in purchase of such unrecorded stock of rice has been recorded in the books of account and offered to tax by crediting the filed amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not: see any infirmity in assesses bringing such transaction in its' books of accounts and the accounting treatment thereof so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Ahmadabad I.T.A.T. Bench in the case of Chokshi Hiralal Maganlal vs. DCIT 141 TTJ (Ahd) 1 dated 21.01.2011 on the same issue. The relevant extract of the decision of Hon'ble Ahmadabad Bench of I.T.A.T. is reproduced hereunder:- Excess stock found during the course of survey is not separate and clearly identifiable but is part of mixed lots found at the premises which included declared stock as per books and also the excess stock as computed by the survey officers, the provisions of section 69B cannot be made applicable as primary condition for invoking the provisions of section 69A 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in the excess stock has to be treated as business income as per detailed reasons given in the case of Fashion World vs. ACIT ITANo.1634/Ahd/2006 4.6 The appellant has submitted that the AO had made the addition afterapplying section 115BBE in the appellant s case, During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness activities i.e. of Chana Chana Dal and no other business was carried out by him. Further, the AO had not brought any cogent evidence and facts to prove that the appellant had earned income from other sources. The AO had made the double addition to the appellant s income by disallowing debit balance of trading account and credit balance of Profit and Loss account. Hence, in light of the above facts and especially the decision of jurisdictional bench of Hon'ble I.T.A.T. bench, Indore, the addition so made by the AO is hereby deleted and accordingly, these grounds of appeal are allowed. 11. On perusal of the above finding of Ld. CIT(A) and the decisions referred therein we observe that the revenue authorities have not disputed the fact that the assessee s only source of income is from Dal Basen Mill. No other incriminating material or document was found during the course of survey which could indicate that the assessee has any other source of income. It can thus be concluded that the alleged excess stock is part of the business income of the assessee. It is also discernable from the records that when the statement was taken during the course of survey, son of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3,90,15,200/-. This entry has been passed without any basis i.e. copy of purchase bills/vouchers and payment made for this purchases. The excess stock found during the course of survey is assessable as income from other sources and not business income. If this entry is removed from the Trading account, there will be gross profit of ₹ 3,80,84,859/-. Similarly, the amount of ₹ 4,00,00,043/- credited in the P L account is also required to be removed and to be added in the total income of the assessee as income from other sources. In that case the income of the assessee from business comes to ₹ 2,11,37,081/-. 13. The above observation of the Ld. AO clearly indicates that he is not aware how to disclose the undisclosed income in the books of account. In case he was not satisfied with the book results, he has to first find error/mistake in the books of account, give detailed finding on it, and then should have re-casted the trading account. The manner in which the Ld. AO has made addition is not justified and thus Ld. CIT(A) has rightly deleted the addition by accepting book results shown by the assessee. Ld. AO has also not given weightage to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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