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TMI Blog2024 (9) TMI 1657X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in law and in facts by not appreciating the facts that the main reason for excess stock found was because of unrecorded purchases. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law and in facts by not appreciating the facts that the assessee has failed to explain the nature and source of income utilized for unrecorded purchases which resulted into excess stock found and failed to produce supporting purchase bill or other relevant documentary evidences. 4. The appellant craves leave to add, alter, modify, delete and amend any of the grounds, as per the circumstances of the case." 3. Both the learned representatives next invited our attention to the CIT(A)-NFAC's impugned lower appellate discussion reversing the assessment findings assessing the assessee's sec. 69B unaccounted stock amount of Rs. 7,00,00,100/- in higher rate u/sec. 115BBE of the Act as follows : 3.2 have gone through the assessment order and the submission filed by the appellant. In this case, the appellant has filed a detailed written submission. Vide the said submission the appellant has submitted that a survey action was conducted at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings were that specific information was received by the Customs Department indicating that the taxpayer would bring imported gold in his car and would make delivery thereof. The car was seized and at that time during search gold bars of foreign markings were recovered. A bag containing currency notes was also recovered. The statements which were recorded under section 108 of the Customs Act were considered in the adjudication proceedings. The Hon'ble High Court upheld the decision of Tribunal that the value of gold was liable to be included in the income of the assessee as the source of investment in the gold or of its acquisition was not explained and that the assessee was not entitled to claim that the value of the gold should be allowed as a deduction from his income. The relevant portion of the judgement is as under. 6. Under section 4 of the Act, income-tax is to be charged in accordance with the provisions of the Act-in respect of the total income of the previous year of every person. As provided by section 5 of the Act, total income of any previous year of a person would, inter alia, include all income from whatever source derived which is received or is deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature covered under the scheme of sections 69, 69A, 698 and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall. even under the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions. 7. It is, therefore, clear that, when the investment in or acquisition of gold, which was recovered from the assessee was not recorded in the books of account and the assessee offered no explanation about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head "business income" and not under the head income from other sources. 3.9 Incase of Shri Lovish Singhal vs ITO (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25 May 2018), the Jodhpur Tribunal applying the proposition of law laid down by the Hon'ble Rajasthan High Court in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act and accordingly held that there is no justification for taxing such income U/s 115BBE of the Act. 3.10 In case of Oberoi Motors vs ACIT [ITA No. 3512/Del/2018 AY 2012-13 dated 16 July 2021], the taxpayer had declared surrendered income after setoff of business loss. The lower authorities did not accept the above treatment and held that the surrendered amount is deemed income and does not fall under any of the head of income and therefore no set off of business losses could be allowed. The Hon'ble Tribunal held that as the assessee had already introduced the transactions in books of accounts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E is on the assessee. 3.14 To sum up, before assessing the surrendered income under sections 68, 69, 69A to 69D and levy of higher rate of tax u/s 115BBE, following factors are required to be considered- * Whether nature of income is clearly explained during the survey or during assessment proceedings * Whether income can be classified under a particular head of income based on nature so as to demonstrate that it is flowing from one of the specific sources of income of the assessee * Whether supporting evidences for the above are available because the onus to satisfactorily explain the nature and source is on the assessee 3.15 The facts of the present case suggest that at the time of the survey operation the appellant firm has offered additional income under the excess stock is part of the business activities and no other activity is carried out by the appellant firm and in this respect entry was also made in the books of account during the financial year 201 8-19 relevant to assessment year 2019-20 and said additional income in the form of excess stock was offered for taxation under the head of 'business income'. 3.16 Further, at the time of the survey operation the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand as under : "5. The ld. AR submits that the income offered during the course of survey proceedings was also offered to tax by crediting the same to the Trading Account and Profit & Loss Account respectively. He submits that the Assessing Officer assessed the said income under the head "Income from business". Therefore, he submits that having assessed the additional income under the head "Income from business", he cannot subject such income to tax u/s 115BBE of the Act. He also placed reliance on the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Bajargan Traders, 86 taxmann.com 295 (Rajasthan). 6. On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities. 7. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the applicability of provisions of section 115BBE of the Act in respect of income declared during the course of survey proceedings and offered to tax in the return of income. There is no dispute about the amount of addition to be made nor was there any dispute regarding the head of income under which the same was assessed to tax. The dispute is only with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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