KAILAS SIBHASH MANTRI,LATUR vs. ACIT, AURANGABAD

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ITA 969/PUN/2024Status: DisposedITAT Pune14 October 2026AY 2018-1918 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal partly allowed the assessee's appeal. Regarding the addition of Rs. 16,97,000/- for excess stock, the Tribunal held that, following co-ordinate bench decisions, excess stock declared during a survey should be treated as regular business income rather than attracting Section 69B r.w.s. 115BBE, especially when the assessee's sole business is electrical goods trading and the stock is linked to business receipts. The Tribunal found no infirmity in treating this as regular income. However, for the unexplained investment in construction (Rs. 22,75,000/-) and investment in BC (Rs. 35,28,000/-), the Tribunal upheld the action of the AO and CIT(A) in taxing these amounts under Section 69 r.w.s. 115BBE. The reasoning was that it could not be said these investments were out of the electrical items business, as the assessee was also engaged in the business of BC. Furthermore, the assessee had not submitted any satisfactory reply before the AO or CIT(A) to substantiate the source of these investments. The Tribunal noted that the assessee had declared the total income including the additional income of Rs. 75 lakhs in the return filed.

What were the facts?

The assessee, Kailas Subhash Mantri, engaged in the business of electrical items, filed a return of income for Assessment Year 2018-19 declaring a total income of Rs. 1,07,04,220/-. A survey under Section 133A of the Income Tax Act, 1961, was conducted on October 4, 2017, during which the assessee declared additional income of Rs. 75,00,000/- comprising excess stock (Rs. 16,97,000/-), unexplained investment in construction (Rs. 22,75,000/-), and investment in BC (Rs. 35,28,000/-). The Assessing Officer (AO) treated these amounts as deemed income under Sections 69, 69B, read with Section 115BBE of the Act. The Commissioner of Income Tax (Appeals) upheld the AO's action. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the addition of Rs. 35,28,000/- on account of "BC" (Business Chit) is sustainable, considering the documents were allegedly "dumb documents" not found in the assessee's possession, lacking details, and their writer was unknown, and whether its confirmation by the CIT(A) violated natural justice due to non-provision of documents to the assessee? (Question of law and fact, concerning Sections 69 and 115BBE of the Act). 2. Whether the addition of Rs. 16,97,000/- on account of excess stock, declared during the survey, should be taxed at special rates under Section 115BBE, or as regular business income, given it was generated from the continuous regular business of electrical items trading and disclosed in the return? (Question of law and fact, concerning Sections 69B, 115BBE, and general business income provisions). 3. Whether the addition of Rs. 22,75,000/- on account of unexplained investment in construction should be taxed at special rates under Section 115BBE, or as regular income, given it was allegedly disclosed in the return of income and pertains to the relevant financial year? (Question of law and fact, concerning Sections 69 and 115BBE of the Act). Assessee's Contentions: The assessee argued that excess stock should be treated as business income under normal provisions, not under Section 69B r.w.s. 115BBE, citing co-ordinate bench decisions. They also contended that all investments (construction and BC) stemmed from their sole business income from electrical goods and should be taxed normally. The assessee further argued that the "BC" documents were not in their possession, lacked details, and their confirmation violated natural justice. They also claimed to be a layman unaware of BC activities. Revenue's Contentions: The Revenue heavily relied on the orders of the Assessing Officer and the CIT(A).

Which sections of the Income-tax Act were involved?

Section 133A,Section 131,Section 143(2),Section 142(1),Section 69B,Section 69,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA

For Appellant: Dr. Prayag Jha & Prateek Jha
For Respondent: Shri Rajesh Haladkar, Addl. CIT

PER R.K. PANDA, VP:

This appeal filed by the assessee is directed against the order dated 23.03.2024 of the Ld. CIT(A), Pune-12 relating to assessment year 2018-19. 2. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of electrical items on wholesale and retail basis in the name and style M/s. Ashok Lights. He filed his return of income on 15.03.2019 declaring total income of Rs.1,07,04,220/-. In this case a survey action u/s 133A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was carried out on 04.10.2017 during which the books of account and other documents were impounded. Accordingly, the case was selected for scrutiny under the manual selection guidelines issued by CBDT and a notice u/s 143(2) of the Act was issued

2 and served on the assessee. Subsequently, notice u/s 142(1) along with a questionnaire was issued and served on the assessee in response to which the assessee filed certain details. The Assessing Officer observed that the statement of the assessee was recorded during the course of survey action u/s 131 of the Act during which the assessee has declared additional income of Rs.75 lakhs over and above the regular income, the breakup of which is as under: a) Excess stock Rs.16,97,000/- b) Unexplained investment in construction Rs.22,75,000/- c) Investment in BC Rs.35,28,000/- Total Rs.75,00,000/-

3.

During the course of assessment proceedings the Assessing Officer asked the assessee to explain as to why the unexplained stock so found should not be treated as deemed income u/s 69B of the Act. Similarly, why the unexplained investment in construction and investment in BC should not be taxed under the provisions of section 69 r.w.s. 115BBE of the Act. In absence of any satisfactory explanation given by the assessee and relying on various decisions, the Assessing Officer brought to tax an amount of Rs.32,04,220/- under normal provisions, Rs.58,03,000/- u/s 69 of the Act and Rs.16,97,000/- u/s 69B r.w.s. 115BBE of the Act.

4.

In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer in invoking the provisions of section 69 r.w.s. 115BBE of the Act on account of excess stock, the unexplained investment in construction and investment in BC by observing as under:

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5.

Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal by raising the following grounds: 1. 1) On the facts and circumstance prevailing in the case and in law, the honorable CIT appeal 12, Pune has erred in confirming the addition of Rs.35,28,000/- made by the AO on account of "BC" even though the document found was dumb documents in as much as (i) It was not found in possession of the appellant, (ii) No details of dates F.Y etc. were mention on the documents, (iii) The writer of the documents was unknown. 2) The copy of document considered as "BC" by the authorised officer has obtained the disclosure from the appellant as additional income of Rs.35,28,000/- without providing the document to him is a violation of natural justice.

11 3) The appellant being a layman he could not understood the nature of documents and contents written there on, where as he was never involved in the playing of BC activities. 4) The affidavit duly notarised was submitted before the honorable CIT Appeal, has not been given due consideration, which violets the principle of natural justice to the appellant. 5) It is prayed that the addition made by the AO which is confirmed by the honorable CIT Appeal, it is requested that it may be deleted. 2. 1) On the facts and circumstance prevailing in the case and in law, the honorable CIT appeal 12, Pune has erred in treating the addition of Rs.16,97,000/- made by the AO to be taxed at special rate u/s 115BBE even though the additional stock declared during the survey is generated out of the continuous regular business of electrical items trading. Therefore, the honorable CIT Appeal has erred in confirming, to tax the disclosed amount of additional income on account of stocks is totally erroneous and hence the same may kindly be taxed at normal rates. 2) Furthermore, the Ld AO has erred in not considering the fact that the stock declared by the appellant was disclosed in the return of income submitted by the appellant and as such there was no application of section 69 r.w.s 115BBE. 3. 1) On the facts and circumstance prevailing in the case and in law, the honorable CIT appeal - 12, Pune has erred in supporting the addition of Rs.22,75,000/- to be taxed at special rate as applied by the AO, even though the said investment is disclosed in the return of income and it pertains to the current financial year relevant to A.Y 2018-19. 6. The Ld. Counsel for the assessee at the outset referring to the decisions of the Co-ordinate Bench of the Tribunal in the case of ITO vs. Nishatbegum Syed Baba Rasool Patel vide ITA No.1351/PUN/2024 order dated 22.05.2025 for assessment year 2017-18 and in the case of ITO vs. Deepak Baburao Vispute vide ITA No.2399/PUN/2025 order dated 16.02.2026 for assessment year 2020-21 submitted that excess stock found during the course of survey has been treated as business income instead of attracting the provisions of section 69B r.w.s. 115BBE of the Act. He submitted that the only source of income of the assessee is that of 12 business of electrical goods, therefore, the investment in house construction and investment in BC also are out of such business income and therefore, should be taxed under the normal provisions.

7.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A).

8.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed the return of income declaring total income of Rs.1,07,04,220/- which includes the additional income of Rs.75 lakhs which was declared during the course of survey and the breakup of which is as under: a) Excess stock Rs.16,97,000/- b) Unexplained investment in construction Rs.22,75,000/- c) Investment in BC Rs.35,28,000/- Rs.75,00,000/- Total

9.

We find the Assessing Officer while accepting the returned income at Rs.1,07,04,220/- invoked the provisions of section 69B r.w.s. 115BBE of the Act for excess stock of Rs.16,97,000/-, provisions of section 69 r.w.s. 115BBE of the Act for the unexplained investment in construction and the investment in BC. We find, the Ld. CIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the 13 submission of the Ld. Counsel for the assessee that excess stock found during the course of survey has been treated as business income under the normal provisions by the decision of the Co-ordinate Bench of the Tribunal. It is also his submission that since the assessee has only one source of income i.e. income from electrical goods as the assessee is engaged in the business of electrical items on wholesale and retail basis, therefore, the same also should be taxed under normal provisions and not by invoking the provisions of section 115BBE of the Act.

10.

So far as the addition of Rs.16,97,000/- by invoking the provisions of section 69B r.w.s. 115BBE of the Act is concerned, we find the Co-ordinate Bench of the Tribunal in a number of decisions has held that the excess stock declared during the course of survey u/s 133A of the Act to be treated as regular income instead of taxing u/s 69B r.w.s. 115BBE of the Act.

11.

We find the Co-ordinate Bench of the Tribunal in the case of ITO vs. Deepak Baburao Vispute (supra) has decided an identical issue and upheld the decision of the CIT(A) in directing the Assessing Officer to treat the said income as regular income instead of applying the provisions of section 69B r.w.s. 115BBE of the Act. The relevant observations of the Tribunal read as under:

“12. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the order of the Ld. CIT(A) in directing the Assessing Officer to tax the excess stock declared during the course of survey u/s 133A as regular income instead of taxing u/s 69B r.w.s. 115BBE is concerned, we find the Ld. CIT(A) deleted the same by observing as under:

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13.

We do not find any infirmity in the order of the Ld. CIT(A) on this issue. Admittedly the excess stock of Rs.4,42,86,847/- was declared during the course of survey u/s 133A at the premises of the assessee which is engaged in the business of sale of gold and silvery jewellery under the name and style of M/s. Vispute Saraf. No other business activity whatsoever was detected during the course of survey other than the above jewellery business. It is also an admitted fact that the assessee has credited Rs.4,42,86,847/- in the trading and profit and loss account and has shown the same while filing the return of income for the year under consideration. The assessee has explained before the Assessing Officer that the 17 said stock has been accumulated over a period of time out of cash sales which remained to be accounted for during the year. It was explained before the Ld. CIT(A) that the disclosure made during the course of survey action has direct nexus with the business carried on by the assessee. Since the excess stock was declared in the form of gold, silver and diamond and there is no other business activity carried on by the assessee other than the jewellery business, therefore, we find merit in the arguments of the Ld. Counsel for the assessee that the source of excess stock found is nothing but out of the business receipts.

14.

It has been held in various decisions that when the assessee surrenders income on account of excess stock found during the course of survey u/s 133A or search and no other activities other than the same business activities are carried on by the assessee during the year under consideration, then such income declared by the assessee shall be taxed under the head ‘business income’ only and not as undisclosed investment and the provisions of section 69B r.w.s. 115BBE of the Act cannot be applied. Since the Ld. CIT(A) while deciding the issue has followed the decision of Hon’ble Rajasthan High Court in the case of Bajrang Traders (supra) and the decision of the Coordinate Bench of the Tribunal in the case of DCIT vs. Shri Balaji Ramchandra Ande vide ITA No.625/PUN/2024 order dated 12.01.2025 for assessment year 2018-19 (supra), therefore, in absence of any contrary material brought to our notice by the Revenue that the assessee in fact was having some other activities other than the business of trading in gold and silver jewellery, we do not find any infirmity in the order of the Ld. CIT(A) directing the Assessing Officer to treat such income as regular income instead of applying provisions of section 69B r.w.s. 115BBE of the Act. The ground No.(i) raised by the Revenue on this issue is accordingly dismissed.”

12.

So far as the other two items i.e. unexplained investment in construction of Rs.22,75,000/- and investment in BC of Rs.35,28,000/- are concerned, it cannot be said that the said income is out of business of electrical items since the assessee was also engaged in the business of BC i.e. Business Chit. The assessee has not submitted any reply before the Assessing Officer or the Ld. CIT(A) to substantiate the source of such investment in construction of the house and investment in BC. We, therefore, uphold the action of the Assessing Officer in taxing the above two items u/s 69 r.w.s. 115BBE of the Act which has been upheld by the Ld. CIT(A). The grounds raised by the assessee are accordingly partly allowed.

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13.

In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open Court on 14th October, 2026. (ASTHA CHANDRA) VICE PRESIDENT पुणे Pune; दिन ांक Dated : 14th October, 2026 GCVSR

आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent

3.

The concerned Pr.CIT, Pune

4.

DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, Sunil Kumar More //// More Date: 2026.10.25 10:50:16 +05'30'

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