MANOJ VISHWANATH PATIL,JALGAON vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -1, NASHIK

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ITA 938/PUN/2022Status: DisposedITAT Pune06 July 2023AY 2019-204 pages
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What did the Tribunal hold?

The Tribunal held that excess stock found during a survey is undisclosed business income and not unexplained investment, thus not taxable under Section 115BBE. However, the unrecorded expenditure on building was considered unexplained investment taxable under Section 115BBE.

What were the facts?

During a survey, excess stock of Rs. 31,84,121 and unrecorded building expenditure of Rs. 2,52,500 were found. The assessee surrendered these amounts totaling Rs. 34,36,621 and offered them in the return. The AO taxed these under Section 115BBE, and the CIT(A) upheld this.

What were the issues?

Whether excess stock found during a survey constitutes unexplained investment taxable under Section 115BBE. Whether unrecorded expenditure on building is unexplained investment taxable under Section 115BBE.

Which sections of the Income-tax Act were involved?

Section 115BBE,Section 133A,Section 69,Section 69B

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Income Tax Appellate Tribunal, SMC BENCH, PUNE

Before: SHRI R.S. SYAL

For Respondent: Shri Arvind Desai

आदेश / ORDER

PER R.S. SYAL, VP:

1.

This appeal by the assessee arises out of the order dated 30-11-2022 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2019-20.

2.

The only issue raised herein is against the taxability of Rs.34,36,621/- u/s.115BBE as against regular income reported by the assessee.

3.

Briefly stated, the facts of the case are that the assessee was subjected to survey u/s.133A on 25-10-2018. Excess stock of Rs.31,84,121/- was found. Expenditure on building to the tune of Rs.2,52,500/- was also found to have been incurred by the assessee which was not recorded. The assessee surrendered both the amounts totalling to Rs.34,36,621/- and offered them in the return of income filed. The AO reduced these two amounts from the total income offered and treated them as undisclosed money (stock) u/s 69 and unexplained money (cash investment) u/s.69B and taxed them u/s.115BBE at 60%. The ld. CIT(A) affirmed the view taken by the AO, against which the assessee has come up in appeal before the Tribunal.

4.

I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of the assessee.

However, written submissions have been filed, which have been considered.

5.

The first amount is excess stock found during the course of survey, which was duly offered for taxation and also included in the return of income. This amount representing excess stock is undisclosed business income and not unexplained investment. As such, the question of its taxability u/s.115BBE does not arise. Similar view has been taken by the Pune benches of the tribunal in Ashok K.

Kriplani (ITA No.252/PUN/2023 dt. 03-07-2023) in which it has been held that excess stock found during the course of survey cannot be considered as unexplained investment u/s.69 of the Act. In reaching this conclusion, the Tribunal, in turn, relied on the judgment of the Hon’ble Rajasthan High Court in CIT Vs. Bajargan Traders (2017) 86 taxmann.com 295 (Rajasthan). This ground is thus allowed.

6.

The second amount is Rs.2,52,500/- which has been taxed u/s.69B. The assessee was found to have suppressed cost of construction by a sum of Rs.2,52,500/- which was admitted during the course of survey. This is clearly in the nature of unexplained investment falls u/s.69B of the Act and hence has to be subjected to tax u/s.115BBE of the Act. Unlike undisclosed business income on account of excess stock, this amount represents unexplained investment. I, therefore, approve the view taken by the ld. CIT(A) to this extent.

7.

In the result, the appeal is partly allowed. Order pronounced in the Open Court on 06th July, 2023.

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