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Facts
During a survey, the assessee's stock was found to be valued at Rs.1,42,21,591/- (cost price) after deductions, while the books showed Rs.89,75,991/-, a difference of Rs.52,45,600/-. The assessee admitted this excess as additional income from business.
Held
The Tribunal held that the additional income from excess stock, having been declared as business income by the assessee, should be taxed at normal rates and not under Section 115BBE as unexplained income or investment. The orders of the AO and CIT(A) were reversed.
Key Issues
Whether the excess stock found during a survey, declared as business income by the assessee, is taxable under Section 115BBE or at normal rates. Whether the AO and CIT(A) correctly classified the excess stock as unexplained investment or deemed income.
Sections Cited
133A, 68, 69B, 115BBE, 147, 148, 143(3)
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2019-20 M/s. Lucky Furniture, Vs. ACIT, Central Circle, 215/11, Opp. Konduskar Petrol Kolhapur. Pump, NH 4, Gokul Shirgaon, Kolhapur- 416234. PAN : AAGFL7482B Appellant Respondent Assessee by : Shri Bhuvanesh Kankani Revenue by Shri Ramnath P. Murkunde : Date of hearing : 11.02.2025 Date of pronouncement : 08.05.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 30.08.2024 passed by Ld. CIT(A), Pune-11 [‘Ld. CIT(A)’] for the assessment year 2019-20.
The appellant has raised the following grounds of appeal :-
1. On the facts and circumstances prevailing in the case and as per provisions & scheme of the Income-tax Act, 1961 ('the Act') it be held that the excess stock of Rs.52,45,600/- found during Survey, be taxed under the head "Profit and Gains from Business and Profession'. Accordingly, the addition so made by the Ld. AO by categorizing said excess stock of Rs.52,45,600/- 68 of the Act and that upheld by Ld. CIT(A) u/s 69B of the Act be kindly deleted and the appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground and on the facts and circumstances prevailing in the case and as per provisions and scheme of the Income-tax Act, 1961 ('the Act') it be held that addition made u/s 68 of the Act by Ld. AO and that upheld by Ld. CIT(A) u/s 69B of the Act is incorrect and improper. Accordingly, the income tax so assessed u/s 68/69B of the Act and income tax so computed u/s 115BBE of the Act be deleted and appellant be granted just and proper relief in this respect.
The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal
at the time of hearing.”
3. Facts of the case, in brief, are that the assessee firm is engaged in the business of trading of furniture and related material. A survey action u/s 133A of the IT Act was carried out at the business premises of assessee on 06.02.2019. During the course of survey proceedings, the stock physically found was inventorized and valued at Rs.1,42,21,59l/- (cost price), after deducting 20% for discount & 20% for GP from the price tag. On the other hand, the value of stock as on the date of survey as per the trading account was Rs.89,75,991/-. Thus, there was a difference of Rs.52,45,600/- in the value of stock actually found during the survey and the value of stock as per books of accounts. The partner of the assessee firm Shri Rajindra R. Bade was confronted with Q & ans no.7 that the stock is valued after deducting the discount of 20% which is regular but sometimes the discount is over & above the regular discount due to which there is difference in value of the stock and therefore admitted an additional income of Rs.52,45,600/- on account of value of excess stock. Subsequently, the assessee filed its return of income on 30.09.2019 by declaring the total income of Rs.59,22,2801- which includes above additional income of Rs.52,45,600/- towards excess value of stock. In this manner, in the return filed by the assessee, the additional income of Rs.52,45,600/- was declared as business income.
During the assessment proceedings, the Assessing Officer asked the assessee to explain as to why the additional income of Rs.52,45,600/- should not be charged to tax as per the tax rates provided u/s. 115BBE of the Act. After considering the facts of the case and the submission of the appellant, the Assessing Officer held that the said additional income is taxable u/s. 68 of the Act as deemed income. Accordingly, the assessment was completed by determining total income at Rs.62,19,748/- as against the income Rs.6,76,679/-. Above assessed income includes Rs.52,45,600/- as deemed income u/s 68 r.w.s. 115BBE of the IT Act.
After considering the reply of the assessee Ld. CIT(A) dismissed the appeal filed by the assesse. However, Ld. CIT(A) held that the said additional income of Rs.52,45,600/- shall be taxable u/s 69B of the IT Act as unexplained investment instead of u/s 68 of the IT Act. It is this order against which the assesse is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A) is unjustified. Ld. AR submitted before the Bench that the additional income declared by the assessee was disclosed as business income and therefore it should be taxed at normal rates instead of as per the rates provided in section 115BBE of the IT Act. Ld. AR also argued that the above additional income declared by the assessee is neither taxable u/s 68 nor u/s 69B of the IT Act as held by Ld. CIT(A) and accordingly requested to delete the addition. In support of its contentions LD AR relied on judgement passed in the case of PCIT vs. Bajargan Traders & other decisions passed by coordinate benches of this Tribunal.
Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including paper-book furnished by the assessee. The only grievance raised by the counsel of the assesse is with regard to the applicability of provisions of section 115BBE of the IT Act in respect of income declared during the course of survey proceedings and offered to tax in the return of income. There is no dispute about the amount of addition to be made nor was there any dispute regarding the head of income under which the same was assessed to tax since the same income was voluntarily declared by the assessee as business income in his return of income and tax at normal rate was paid by him. The dispute is only with regard to the applicability of provisions of section 115BBE of the Act. Admittedly, the value of excess stock found during the course of survey was offered for taxation as an additional income. Therefore, the amount representing excess stock is certainly undisclosed business income and cannot be termed as unexplained investment. Therefore, the presumption is to be drawn that the additional income was derived from the business. Thus, it cannot be said that the source for the additional income remain unexplained and, therefore, the provisions of section 115BBE have no application to the present case. The judgement of the Hon’ble Rajasthan High Court in the case of PCIT vs. Bajargan Traders (2017) 86 taxmann.com 295 (Rajasthan) & also other decisions relied on by the assessee are squarely applicable to the facts of the present case. The reliance placed by Ld. CIT(A) on the decision of the Hon’ble Madras High Court in the case of M/s. SVS Oils Mills Vs. ACIT (2020) 113 taxmann.com 388 (Madras) have no application to the facts of the present case, inasmuch as, in the said case, no explanation as to the source of excess stock was offered, whereas, in the present case, it is undisputed fact that the additional income was derived from business. The other judicial precedents relied on by Ld. CIT(A) are distinguishable and not applicable to the facts of the present case. Therefore, the orders of the Assessing Officer as well as of Ld. CIT(A) are reversed and accordingly the Assessing Officer is directed not to tax the additional income under