TAHOORA PROTEINS,PANCHMAHAL vs. THE ITO, WARD-2 NOW WARD-1, GODHRA

1. The Return of Income was selected for scrutiny assessment and show cause notice was issued by the A.O. proposing to make addition of Rs.1.25 crores as admitted unaccounted stock should be taxed u/s. 69 of the Act r.w.s. 115BBE of the Act and also why not to disallow set off carried forward loss and depreciation claimed by the assessee. The assessee replied that the amount of Rs. 1.25 crores as additional business income is nothing but the undisclosed business income of the assessee which is disclosed and considered for tax purposes. Since there were carried forward business loss and depreciation in the earlier years, as per the provisions of law, the same had to be set off against the income determined under any other head of income.

Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who has confirmed the excess stock found at the premises of the assessee firm was clearly and admittedly not recorded in the stock register or Books of Accounts maintained by the firm. This was detected during the survey proceedings and statements recorded from the Partner of the assessee firm. Therefore the provisions of Section 69 are clearly attracted and A.O. was rightly applied u/s. 115BBE of the Act, thereby confirmed the addition made by the assessing officer and dismissed the assessee appeal.

The learned CIT (A) has erred in law and on the facts of the appellant's case in confirming disallowance of set-off of current year and brought forward business loss and depreciation against income assessed.

The learned CIT (A) has erred in law and on the facts of the appellant's case in confirming tax levied U/s 1158BE of the Act.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

Heard rival submissions at length and perused the materials available on record including the Paper Book and case laws filed by the assessee. Paper-wise description of impounded material during the course of survey clearly states the unaccounted Tuver Dal in the form of excess stock and packing materials which the alleged discrepancy amounting to Rs.1,20,86,080/-. Therefore the Partner of the Firm agreed to declare additional income of Rs. 1.25 crores in order to buy peace and avoid costly litigation. Accordingly Rs.1.25 crores is credited as Misc. Income in the Profit and Loss account and offered to tax as ‘income from business’ for the year under consideration. The said income of Rs. 1.25 crores is accounted in the books of accounts for the Financial Year 2014-15 separately under the head direct incomes with the caption “Misc. Income”, in order to match the income disclosed during the course of survey. However, the net profit amounting to Rs.96,25,027/- which included the income of Rs.1.25 crores declared is business income and offered to tax in the Return of Income filed by the assessee firm. However the Ld. A.O. has not accepted the above

1. It is undisputed fact that the excess stock found during the course of survey is of Tuver Dal which is a trading/manufacturing goods found, but not accounted. It is also not a case on account of any bogus purchase or purchased of items which are different. Any discrepancies in treating stock is ‘income from business’ and taxable as ‘income from business’ only. It is most obvious that whatever found from the business premises of the assessee firm would be nothing but documents pertaining to business transaction, unless and until some contradictory evidence was found by the Survey party about other sources other than business. However, in assessee’s case no contradictory evidences found during the course of survey and Post survey enquiry. Further the Partner of the firm in his reply to Question No. 13 to 19 of the statement recorded on 02-03-2015 clearly admitted no other business carried out by the firm and accepted to offer the additional income and agreed to pay tax at normal rate at 30%. Therefore in our considered view, the Lower Authorities are not correct in adding the excess stock declared by the assessee u/s. 69 of the Act and also charging u/s. 115BBE of the Act. More particularly, for the Asst. Year 2015-16 which is not at all applicable the provisions of section 115BBE of the Act.

3. Further Co-ordinate Bench of this Tribunal in the case of M/s. Fashion World vs. ACIT in ITA No. 1634/Ahd/2006 wherein it is held as follows: "14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate physical identity being furniture and fixtures, air-conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only."

Respectfully following the above decisions, the grounds of appeal raised by the assessee are hereby allowed with direction to the Assessing Officer to allow set off of current year and brought forward business loss and depreciation against the income assessed and also not to charge tax u/s. 115BBE of the Act.

In the result, the appeal filed by the Assessee is hereby allowed.

Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,