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Facts
The assessee, engaged in trading metal vessels, underwent a survey where a significant stock difference was identified between physical and book stock. A balance of Rs.10,83,000/- remained unexplained after accounting for admitted differences, leading the Assessing Officer to make an addition under Section 69, taxed under Section 115BBE. The CIT(A) sustained an addition of Rs.6,65,437/-.
Held
The Tribunal partially set aside the CIT(A)'s order regarding the sustained addition of Rs.6,65,437/- and directed the AO to verify the assessee's explanation with the submitted paper book. If the explanation is found true, the AO is instructed to delete the addition. The appeal was allowed for statistical purposes.
Key Issues
Whether the addition made on account of unexplained investment due to stock difference was justified, and whether the assessee's explanation for the excess stock should be verified by the AO.
Sections Cited
143(2), 142(1), 69, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH
आदेश / O R D E R
PER MANU KUMAR GIRI, JM:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short ‘the Ld.CIT(A)’), Chennai-20, dated 26.03.2025 for the Assessment Year (hereinafter in short ‘AY’) 2019-20.
The brief facts of the case are that the assessee is engaged in the trading business of metal vessels and related goods. A survey was (AY 2019-20) PVS Metal Mart conducted in the business premises of the appellant on 24.01.2019. The appellant filed return of income for the AY 2019-20 on 31.10.2019, declaring total income of Rs.15,34,270/-. The case was selected for scrutiny and notice u/s 143(2) dated 29.09.2020 was issued to the appellant. Further, notice u/s 142(1) of the Act was issued on 03.03.2021. During the course of survey, it was found that the physical inventory of stock found at the appellant's business premises was Rs.67,63,656/- whereas the book stock as per tally account was only Rs.13,19,857/-. Thereafter, allowing the GST component and gross profit, the difference of the stock was arrived at Rs.40,83,176/-. The AO had observed that the appellant had admitted the stock difference of Rs.30,00,000/- is accounted in the books and offered to tax. However, it was also found that balance of Rs.10,83,000/-was not recorded in the books of accounts and no source for purchase of the stock was provided. On the basis of the above, the AO had made addition of Rs. 10,83,000/- as unexplained investment u/s 69 of the Act and taxed as per the provisions of section 115BBE of the Act.
On further appeal to ld. CIT(A), sustained an addition of Rs.6,65,437/- being excess stock not offered and partly allowed the appeal.
Now assessee is in further appeal before us.
(AY 2019-20) PVS Metal Mart 3. Before us, the ld. counsel for the assessee filed paper book containing pages 1 to 26 to explain the addition on account of excess stock which has been partly sustained by the ld. CIT(A). He submitted that a sum of Rs.15,00,000/- had been offered in the hands of the Firm. The ld. DR on the other hand submitted that paper book containing pages 1 to 26 is subject to verification by the AO. Therefore, in the light of the above rival submissions, we partially set aside the impugned order limited to the sustained addition of Rs.6,65,437/- being excess stock not offered, to the file of AO to verify the explanation of the assessee in the light of the Paper book filed before us. If the explanation found true, then the AO is directed to delete the addition as partly sustained by the ld.CIT(A).
In result, appeal of the assessee is allowed for statistical purpose.
Order pronounced on the 21st day of July, 2025, in Chennai.