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TMI Blog2025 (3) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... t prays for following ratio of said decision. 3. Commissioner of Income Tax(Appeals) has no authority or Jurisdiction to Substitute other Sections like 69,69A, 69B for Sec.68 applied by Assessing Officer. Appellant prays to cancel the same. 4. CIT(A) is not just and fair in confirming applicability of special rate of Tax u/s 115BВЕ. 5. Appellant denies liability to Interest u/s 234, same may please be cancelled. 6. Appellant prays to cancel the levy of interest charged u/s 234. 7. Appellant prays to add, alter, amend, modify and/or withdraw the ground." 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of manufacturing of wooden packing boxes. A survey u/s 133A of the Act was conducted on 13.02.2019 and excess stock was detected. The assessee after duly disclosing the unaccounted excess stock of Rs. 50,05,145/- in its financial statements, filed the return of income for assessment year 2019-20 on 31.10.2019 declaring income of Rs. 48,23,690/-. Case selected for compulsory scrutiny followed by validly serving notices u/s 143(2) and 142(1) of the Act. Ld. Assessing Officer after considering the submissions of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence in stock may be on account of various reasons. However, to cover up the irregularities, the resultant so-called difference in stock worked out on the basis of tentative Trading Account is offered to tax as our regular Business Income over and above current year's (l.e.A.Y.2019-20] Normal Income." Assessing Officer has reproduced the same in Para 3 of the Order. IT WILL BE SEEN AND NOTED THAT SURVEY PARTY OFFICER ACCEPTED IT AS BUSINESS INCOME, SURVEY PARTY DID NOT EVEN QUESTION SAYING WHY IT SHOULD NOT BE ASSESSED U/S69, 69A, APPLYING 115BBE. 4) Admittedly, Assessee has not maintained Stock record nor it is practicable to maintain considering very small and number of items and every year Profit is arrived at on estimated Gross Profit and taking balancing figure as stock. 5) Assessing Officer and Survey party has accepted valuation from identified purchase Bill. The nature of Business is such that after full sheet of Timber, Rubber: Ply or other material is taken as cost for Deciding/Quoting Sale price, But actually pieces and parts remains which are used, that Leaves/remains and same wherever possible is used, avoiding cutting New Sheet and Because of estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D/2020 A.Y.2017-18 Dated 06/01/2022." 7. On the other hand, Ld. DR vehemently argued supporting the orders of both the lower authorities and stated that the alleged excess stock is to be treated as 'unaccounted investments' in excess stock and has been rightly treated as 'income from other sources' by the Assessing Officer. 8. We have heard rival contentions and perused the record placed before us. The only issue for our consideration is whether the value of excess stock found at the premises of the assessee during the course of survey u/s 133A of the Act on 12.02.2019 is to be treated as 'business income' or 'income from other sources'. We note that the assessee is a partnership firm and its only source of income is from machinery packing small furniture items, small cupboard etc. and other packing material. The alleged excess stock was calculated by the Department on the basis of Tentative Trading Account prepared on the date of survey. During the course of survey, the assessee was asked to explain the difference found in the stock of Rs. 50,05,145/-. It was specifically stated in reply to question no.20 that the stock at the business showroom and godown premises are not separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- found during the course of survey u/s 133A of the Act. I observe that the assessee has accepted the excess stock and have offered it to tax and paid due taxes as per the normal provisions of Income Tax Act. Ld. A.O invoked provisions of Section 115BBE of the Act treating the surrendered income as unexplained investment and thus calculated the tax on higher rate as provided u/s 115BBE of the Act. 6.1 The question before me is whether the surrendered income is to be treated as 'business income or as Income from other source u/s 69 of the Act'. For this the nature of surrendered income needs to be examined. Undisputedly except the physical stock taken and calculation of excess stock, no other incriminating material was found during the course of survey nor any other reference to any evidence has been made in the assessment order which could indicate that the assessee carries out any other activity or has income from any other source. Now coming to the surrender of excess stock, I note that on the day of survey physical stock was taken and as per the inventory of stock sheet placed at page 37 of paper book 6 items are mentioned and after taking the quantity and applying the rate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment which are not recorded in the books of accounts but in the case of the assessee since the stock records are not maintained and they are merely estimated there is no concrete evidence of any unaccounted investment in stock. Had there been the stock records available at the time of survey and the quantitative details of the same was available in the stock records and then during the course of survey if the excess stock in quantitative form had been found then the case of the revenue could have been more stronger. 6.2 But in the instant case I observe that the assessee estimated the stock at the year end and even the revenue authority have estimated the stock in hand on survey date at Rs. 27,59,426/-. But the method applied by survey team for calculating such stock and whether it was actually the stock as per books is nowhere discernable from the records. Further it is also noted that no other incriminating material was found during the survey proceedings. So in all it is purely an exercise based on estimation and there is no concrete evidence put-forth by the revenue authorities which could support their action of treating the alleged surrender as Income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared by the assessee, then it is assessable as deemed income of assessee u/s. 69A of the Act and not as business income. In this case the Assessing Officer made addition of surrendered amount u/s. 69 of the Act as the assessee could not explain the source from where it was derived by the assessee. In the present case undisputedly the Assessing Officer has not made any addition u/s. 69 or any provision of the Act and has accepted return income of the assessee. In the present case we are in agreement with the contention of the learned AR that the orders of the authorities below clearly reveal that the amount of excess stock & excess cash found during the course of survey business income of the assessee as the assessee is in the business of trading in jewellery, metal of bullion and the excess stock found during the search & survey was accumulated from transaction of metal of bullion carried out in the forward community trading and mediation and the same was surrendered as excess stock and offered to taxation as business of the assessee. The Ld. CIT(DR) could not dislodge the contention and observations of the Ld. CIT(A) that the surrendered amount was pertaining to excess stock & ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Shri Lovish Singhal v/s. ITO (supra) by following the judgment of Hon'ble Rajasthan High Court in the case of Bajrang Traders (supra) observed that the excess stock found during the course of survey and surrendered made thereof was found to be taxable as business income under the head "Income from business & profession". Identical facts and circumstances as noted above have been found to be existing in the present case then the Ld. CIT(A) was correct and justified in dismissing the contention of the AO and holding that the AO was not right in observing that the assessee is liable to be taxed as per provision of section 115BBE. Therefore, we too have no hesitation in concluding that the facts of present case do nothing the impugned income in the clutches of section 69/69A/69B and therefore do not warrant application of section 115BBE at all. We conclude so and dismiss the ground raised by revenue being devoid of merit." 6.5 Reliance is further placed on the decision of this Tribunal in the case of ACIT V/s Anoop Neema (supra) wherein this Tribunal observed as under: "8. We on perusal of the above finding and the various judgments and decisions referred hereinabove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rediting the said additional income to profit and loss account and by including in the computation of income in the total income of the assessee which clearly demonstrate the assessee offered the same as business income. The ld. AR vehemently submitted the assessee explained the difference in valuation stock as per the books explained by the assessee through answers to Q. Nos. 10 and 11 of the statement u/s. 131 of the Act and also in response to notice invoking the provisions u/s. 115BBE of the Act during the course of assessment proceedings. We note that the Q. No. 10 is reproduced by the CIT(A) at page No. 10 of the impugned order and on perusal of the same, we note that the assessee explained the difference of Rs. 37,00,000/- as stock purchased on high demand during the marriage seasons and bills will be received late. Therefore, it can be fairly concluded that the excess stock as found during the course of survey is nothing but business income flowing from assessee's regular business. 8. The Hon'ble High Court of Rajasthan in the case of Bajargan Traders reported in (2017) 86 taxmann.com 295 (Rajasthan) was pleased to observe that the amount surrendered under unrecorded stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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