M/S.SURESH RICE MILL vs. THE INCOME TAX OFFICER

Briefly stated, facts of the case are that the assessee-Firm <s running a Rice Mill in an industn'afiy backward District - Rajnandgaon and commenced its business from 29th December, 1997. The assessment year 1999-20CX) was the second year of operation of the Rice Mill and as such, the assessee was entitled for 100% deduction of income under Section 80 IA of the Act. The survey under Section 133A of the Act was conducted on 9t Appellant Assessee M/s Suresh Rice Mitl, A partnership Firm Through Partner Suresh Kumar Agrawal, S/o Late Radheshyam Agrawal, aged about 50 years, Gunj Line Rajnandgaon (CG) RespQndent (Revenue) The tncome Tax Officer Ward -1, Rajnandgaon (CG)

The Revenue preferred an appeal against the order ofthe CIT (A) and the Tribunal, bythe impugned order, partly allowed the appeal and held that the assessee had not taken the plea at the time of survey that the unexplained investment in stock was out of income from industrial undertaking, the assessment was made by invoking provisions of Section 69 of the Act and therefore, the added income has to be treated as falling under the head "Jncome from other sources". However, value of the rice found jn excess and value of the Kanki found short at the time of sun/ey, was considered as income from industrial undertaking and eligible for deduction under Section 80 IA of the Act.

Mr. Shashank Dubey. learned Senior Advocate with Ms. Smiti Sharma, Advocate, appearing for the assessee would argue that the survey was conducted during the accounting year and the same does not constitute undi osed income. There is no provision for surrender of income in sun/ey operations under Section 133A. There is no categorical finding by the AO that the stock discrepancies discovered during suwey operation were jncome derived from undisclosed sources. The Tribunal has pertinently observed that the AO by jmplication has not treated the above income as income derived -from industrial undertaking. The books of accounts and the audit report clearly reveal that the excess stocks found during survey operations were generated from the business of industrial undertaking and in these circumstances, the Tribuna! was not justified in reversing the finding of the CIT (A) and disallowing deduction under Section 80 IA ofthe Act. v\

On the other hand, Mr. Rajeev Shrivastava, learned Standjng Counsel with Mr. Sameer Shrivastava, Advocate for the Revenue, argued that the discrepancies in the stock were discovered at the time of survey operations. Purchase and sale were clearly entered jn the books of accounts of the assessee. The AO, after examining the books of accounts cn the basis of book result, held that the excess stock found during survey was generated through additional funds from extraneous sources and thus, is not entitled to benefit under Section 80 IA of the Act and rejected the explanation of the assessee. The CIT (A) reversed the finding of the AO only on the ground that during the course of sun/ey no documents were found showing that the Firm earned income frpm other sources as no loose papers were found at the time of survey and hence, the said income was part and parcel of the industrial underteking and eligible for deduction under Section 80 IA. The above finding has been ^subsequently reversed by the Tribunal by the impugned order. BI'M Bl •I ^.

Heard learned counsei for the parties. perused the impugned order as also the orders passed by the AO and CIT (A). Also perused the original records.

The AO, after examining the books of accounts maintained by the assessee, held that the exce^s stock found is built up from money from unknown sources injected into the business and the same can be consjdered as unexplained investment and the explanation offered is based on second though. The above finding of the AO has been further confirmed by the Tribunal with respect to value of the excess paddy found during survey proceedjngs ^ the assessee had not taken the plea at the time of survey that the unexplained jnvestment in stock was out of income from industrial undertaking. However, altemative plea of the assessee that the rice and Kanki, being products derived in the manufacturing process of the Mill, can be considered only as income derived from the industrial undertaking, has been accepted. Thus, following the principles of law laid down in the matters of Shri Satyanarayan Agrawaf (supra) and Brijmohan Agrawaf (supra), we hold that acceptance or rejection of explanation offered by the assessee is a finding of fact and the same does not give rise to any substantial question of law. Accordingly, we dismiss the appeal. DHHUENDRA MISHRA Judge R.N. Chandrakar Judge fy