MALA VERNEKAR,KOPPAL vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, BELLARY

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

1. “The order of the NFAC in so far it is against the appellant is opposed to law, weight of evidence, facts and circumstances of the Appellant's case.

2. The NFAC has grossly erred in upholding the addition made u/s 69B of the Act amounting to Rs.3,02,400/- under the facts and circumstances of the case.

Page 2 of 9 3. The NFAC has gross erred in upholding the addition without appreciating the fact that the excess gold and silver jewellery stock found at the business premises belongs to the personal effects of the appellant under the facts and circumstances of the case.

4. The NFAC has grossly erred in upholding the addition without giving credit to the personal belongings of the jewellery to the appellant under the facts and circumstances of the case.

5.1 The NFAC has grossly erred in upholding the addition which is based on the ad-hoc valuation of the gold and silver jewellery as on the date of survey under the facts and circumstances of the case.

Page 3 of 9 2. At the time of hearing, the assessee has not pressed ground Nos.4 to 6. Accordingly, these grounds are dismissed as not pressed.

3.1 The assessee is an individual assessee and is engaged in the business of retail sale of jewellary and silver articles under the name and style Vasudev Jewellars and Bros. The assessee for the impugned assessment year 2018-19 filed her return of income declaring a total income of Rs. 3,79,170/- on 23/07/2018. The return of income filed was processed u/s. 143[1] of the Act.

3.2 The case of the assessee was selected for scrutiny manually by ITO Ward I Koppal and later it was assigned to DCIT central circle Bellary by Pr. CIT Hubli vide his order dated 01/02/2021 and statutory notices were issued. The learned assessing officer called for various details and information which were filed by the assessee from time to time to the satisfaction of the learned assessing officer.

3.3 The learned assessing officer concluded the assessment vide assessment order under Section 143[3] of the Act dated

Page 4 of 9 01/03/2021 determining the total income at Rs. 3,79,170/-. The breakup of the assessed income is as under;

SI. No. Particulars Amount [Rs.] Returned Income 3.79.170/- Income to be taxed at normal rates 76,770/- Income admitted as a result of survey 3,02,400/- declared by the assessee in return charged to tax as unexplained investment u/s 69/69B r.w.s 115BE of the Act 3.4 The learned Assessing Officer levied tax at specified rates on the Income of Rs. 3,02,400/-being amount declared during survey as excess stock as unexplained investment u/s 69/69B r.w.s 115BE of the Act.

3.5 Aggrieved by the order of the learned Assessing Officer, the assessee filed this statutory appeal before this Tribunal under the provisions of section 253 of the Act. The brief facts in support of the case of the assessee are brought out in the following paragraphs.

The issues involved in this appeal is as follows: a)whether Excess stock found in the business premises of the assessee during Survey amounting to Rs. 3,02,400/-is Business Income or Income from other sources u/s. 69A r.w.s. 115BBE of the Act?

[1] The learned assessing officer without appreciating the submissions of the assessee, completed the Assessment on the premise that the assessee has not offered any acceptable and cogent explanation regarding the source of such Excess stock found in the business premises of the assessee during Survey

Page 5 of 9 amounting to Rs. 3,02,400/- u/s. 69A r.w.s. 115BBE of the Act. The assessing Authority has squarely erred in not distinguishing between INVESTMENT and STOCK. [2] Further, the learned assessing officer erred in assessing Excess stock found in the business premises of the assessee amounting to Rs. 3,02,400/- by invoking Section 69A of the Act. For the sake of appreciation of the contentions, the assessee reproduced the provisions of section 69A of the Income Tax Act. Section 69A of the Income Tax Act, 1961 reads as under:

`Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the boo/6 of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.'

[3] From the reading of the section it is clear that section 69A requires the following two conditions to be fulfilled:

[a]There should be money, bullion, jewellery or other valuable article which are not recorded in the Books of Account, if any, maintained by the assessee for any source of income; and [b]The Assessee offers no or satisfactory explanation about the nature and source of acquisition of the said money, bullion, jewellery or other valuable article.

Page 6 of 9 [4] The assessee further submitted that she has satisfactorily explained about the nature and source of the acquisition of the said stock. It is also relevant to note that the provision contains the language 'may' be deemed to be the income of the assessee and not the word 'shall'. Thus, the invoking of section 69A of the Act is not applicable.

[5] The assessee relied on the decisions of the Supreme Court, High Courts and Tribunals which were squarely rejected by learned A.O.

[6] In view of the above the assessee prayed that the assessment made by the learned assessing officer amounting to Rs. 3,02,400/- by invoking the provisions of section 69A of the Act requires to be deleted in toto for the advancement of substantial cause of justice. [7] Levy of Interest Under Section 234B & 234C of the Act: Without prejudice to the right to seek waiver with the CCIT/DG, the assessee denied itself liable to be charged to interest u/s. 234B & 234C of the Act, which under the facts and in the circumstances of the assessee’s case and the same deserves to be cancelled. The levy of interest under section 234B & 234C is not in accordance with law as the rate, period and quantum on which interest has been levied is not discernible. The levy is not in accordance with law and further the assessee was not given the basis and method of calculation of interest under section 234B & 234C of the Act for the purpose of verification of the correctness of the charge of interest.

Page 7 of 9 [8] Wherefore in the light of the above facts and circumstances of the case the assessee prayed to allow the appeal preferred by the assessee for the advancement of substantial cause of justice.

“10. We heard the rival submissions and relied on the documents available in the records. In the argument, the Ld. Counsel for the assessee mentioned that the assessee is a trader and turnover during this FY 2017-18 was an amount of Rs. 10,03,840/- and assessee was not liable for the tax audit u/s. 44AB of the Act. But in business, the excess stock was declared in the trading account and the tax was paid on the difference of stock under normal rate. The Ld. Counsel relied on the order of the Coordinate Bench of ITAT, Bangalore in case of Ragavs Diagnostic & Research Centre Pvt. Ltd. vs. ACIT in by order dated 09.09.2022. It was held as follows: - “13. From the plain reading of the section, it is clear that when an assessee offers no explanation or the explanation offered is not satisfactory in the opinion of the AO, then the amount of such expenditure is to be taxed as income u/s. 69C of the Act. The satisfaction to be recorded by the AO should not be objective satisfaction exercised at his discretion, but a subjective satisfaction based on the facts of the case. It would then mean that justification for exercise of the power has to be found by the authority by making a subjective satisfaction on the basis of objective material and such satisfaction must be reflected in the reasons recorded in writing while exercising the power. (Vide: Dee Vee Projects Ltd. v/s. Union of India & Ors., Writ Petition No.2 693/2021, dated 11.02.2022 (Bombay High Court)). In the present case, the assessee is in the business of running a diagnostic centre and the only source of income is the receipts from patients which is stated to be the source for unexplained expenditure. That being the case the AO has not brought any contrary material on record to state that the source for the expenditure was other than from business income and has formed the opinion based on conjectures and surmises. While exercising the quasi-judicial functions, the administrative authorities have to reach satisfaction on the basis of material available and not on conjectures and surmises. The test of Page 8 of 9 reasonableness has to be satisfied which in our view failed in the case under consideration. Therefore, we are of the view that the additional income offered cannot be taxed u/s. 115BBE and the impugned addition is hereby deleted. Accordingly the assessee is allowed to set off the current year loss against the additional income offered to tax as business income.”

In referred case, the ld. DR is trying to prove that the investment in jewellery was out of income from other sources. But the assessee is the trader of jewellery and nature of investment was out of income generated from business. No contrary judgment was placed by the ld. DR against the submission of assessee. We fully rely on the orders of the Coordinate Bench in case of Ragavs Diagnostic & Research Centre Pvt. Ltd. vs. ACIT (supra). Accordingly, the application of 69B on the assessee is not warranted. So, the tax levied by the revenue on the assessee u/s. 115BBE is liable to be rejected. We order accordingly.

4.1 In view of the above order of the Tribunal, taking a consistent view, the appeal of the assessee is allowed in similar terms.

Page 9 of 9 5. In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open court on 6th Feb, 2023