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TMI Blog2022 (10) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... income offered at Rs. 626500/-. 3. That the Ld. CIT(Appeals)-5 has erred in not appreciating the facts that the stock as per books of accounts was Rs, 4868459/- as against the correct physical stock found at Rs. 4107259/-. That the Ld. CIT has erred in appreciating the fact that the stock pertaining to sister concern Prabhat Traders has also been included to derive the excess stock of Rs. 626500/- . Therefore, it is not the case of excess stock, instead, there was shortage of stock to the tune of Rs. 761200/- [4868459-4107259], 4. That the Id. CIT (Appeals)-5 has erred in ignoring the submissions and evidence brought on record by the assessee to explain the genuineness of the business income surrendered by the assessee. That the Ld. CIT (Appeals)-5 has erred in not appreciating the fact that the statement of husband of the assessee was recorded u/s 133A on 27.02.2019 in which it was duly stated that the additional income was earned out of business income. 5. That without prejudice to ground no 4 above, the CIT(Appeals) has erred in confirming the action of the AO without appreciating the fact that the statement recorded u/s 133A has no evidentiary value. 6. That Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, this is a case of shortage of stock to the tune of Rs. 7,61,200/- [Stock as per books of accounts Rs.48,68,459/- Less stock found Rs.41,07,259/-]. 6. The Ld. AR contended that the CIT(A) has erred in confirming the order of the AO as there was no excess stock and entries made in the books of accounts cannot be taken as conclusive to invoke the provisions of section 115BBE. It was also clarified by the AR that the appellant had offered a sum of Rs. 626500/- in the return of income as against the GP element worked out at 32% on shortage of stock of Rs. 761200/- which comes out to Rs. 243584/-. Therefore, it can be a case of shortage of stock and the balance amount of Rs. 382416/- i.e. Rs. 626500 (-) Rs. 243584 at the most can be said to be offered to cover any other discrepancy and by no stretch of imagination the provisions of section 115BBE can be invoked. 7. The Ld. AR for the assessee has submitted on legal issue of applicability of provisions of section 115BBE and on factual material on record, in respect of excess/ shortage of stock found during the course of survey. The relevant part of the submissions made by the Ld. AR of the assessee are re-produced as under: - 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it is a case of shortage of stock to the tune of Rs.7,61,200/- as contended by the AR and not objected by the department. It was also submitted by the AR that the assessee had offered Rs.6,26,500/- in the return of income under the head 'profit and gains from business and profession' which is evident from copy of trading account (APB, Pg. 20). 10. The Ld. CIT(A) has confirmed the action of AO on the ground that once the assessee has voluntarily surrendered the income and also included the same in ITR and paid taxes and therefore, the AO has rightly made the addition by applying the provisions of section 115BBE on the alleged excess stock of 626500/-. In response to the same, the AR submitted that the provisions of section 69 is not applicable in the present case, as the three jurisdictional conditions required for the purpose of invoking the provisions of section 69 were not satisfied by the AO. 11. During the hearing, the AR drew the attention of the bench on the fact that the CIT(A) has nowhere contradicted the stand of the assessee that there was actual shortage of stock of Rs 7,61,200/- instead of excess stock of Rs 6,26,500/- as computed by the AO. The AR relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of case laws for the proposition that due to lack of knowledge of accounts, entry made under the wrong head cannot be used for making addition. 15. The AR also referred to the audit report for AY 2022-23 where the wrong entry has been rectified by the auditor. The copy of the same is attached at page no 124-142 of the paper book. Even otherwise provisions of section 115BBE are not applicable in case of excess stock. That the amount surrendered has effect of increasing purchase account and correspondingly crediting the profit and loss account. Further, the AR drew the attention of the bench to the statement recorded u/s 131 where the assessee had stated that the income surrendered amounting to Rs.6,26,500/- was earned out of sales made outside the books of accounts. (APB, Pgs. 118-119) The relevant questions relied upon by the AR are as under: - Question 18: - As per physical verification taken at your premise, it has been found that stock of Rs 54,94,959/- is found. Please explain the difference Rs 6,26,500/- with documentary evidence. Answer: - Sir, I am not able to explain the reasons of difference in stock. This may be unaccounted purchase which was not recorded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no excess stock was actually found. It is noted that there was no evidence that the appellant had earned any other source of income. Further, there was no excess stock substantiated on the basis of inventory of stock taken during the course of survey 9APB, Pgs.106-112). Thus, in our view of the matter the difference in stock was stand explained on account of business transactions, as such, the same cannot be added u/s 68 to 69D and therefore, the provisions of section 115BBE cannot be applied. Accordingly, the addition cannot be made merely on the basis of accounting entries particularly when no excess stock was actually found. This view gets support from the apex court in the case of 'Kedar Nath Jute manufacturing company Ltd. Vs Commissioner of income tax', 82 ITR 363. Furthermore, the same view has been followed by 'Delhi High Court in the case of CIT Central-III vs Hitashi Estates', 178 Taxmann 221. Therefore, the provisions of section 115BBE cannot be invoked in the present case as no excess stock was actually found. 19. Under the facts and circumstances of the case, the applicability of provisions of section 115BBE are not relevant in the present case as no excess stock wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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