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Facts
During a survey action, excess stock of Tuver Dal and packing material amounting to Rs. 1,20,86,080/- was found. The partner agreed to declare an additional income of Rs. 1.25 crores. This was accounted for as 'Miscellaneous Income' and offered to tax.
Held
The Tribunal held that the excess stock represented business income and should be taxed as such. They further held that set-off of brought forward losses and depreciation against this income should be allowed, and Section 115BBE was not applicable for AY 2015-16.
Key Issues
Whether the excess stock found during survey is to be treated as business income and if set-off of losses and depreciation is allowable against it, and applicability of Section 115BBE.
Sections Cited
133A, 143(3), 69, 115BBE, 71, 72, 14
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
ITA No: 1613/Ahd/2025 Assessment Year: 2015-16 Tahoora Proteins The ITO, Ward-2, Mujavar Road, Godhra Polan Bzar, Godhra, Vs (Now ITO, Ward-1, Dist: Panchmahal, Godhra) Gujarat-389001 PAN: AAGFT8986J (Appellant) (Respondent) Assessee Represented: Ms. Urvashi Sodhan, A.R. Revenue Represented: Shri Rameshwar P Meena, Sr. D.R. Date of hearing : 10-11-2025 Date of pronouncement : 19-12-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 16.07.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2015-16.
A.Y. 2015-16 Page No 2 Tahoora Proteins vs. ITO
Brief facts of the case is that the assessee is a Partnership Firm engaged in the business of Manufacturing and Trading of Tuver Dal. A survey action u/s. 133A was conducted in the business premises on 02/03/2015 wherein discrepancy in the stock in the form of excess stock of the Tuver Dal, Packing Material, etc. was found amounting to Rs.1,20,86,080/-. The Partner of the Firm agreed to declare total additional income of Rs. 1,25,00,000/- for the present assessment year. The assessee accounted this additional income of Rs. 1.25 crores as Miscellaneous Income which is credited in the profit and loss account for the year ended 31-03-2015 and net profit for the year of Rs.96,25,027/- is offered to tax. Later the assessee firm filed its Return of Income on 29-09- 2015 declaring total income of Rs.7,83,160/- after crediting income declared of Rs. 1.25 crores and set off of brought forward losses and depreciation amounting to Rs.87,60,982/-.
2.1. 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.
A.Y. 2015-16 Page No 3 Tahoora Proteins vs. ITO 2.2. Further Section 14 has classified the different heads of income and income under each head is separately computed and it is not a collection of distinct tax levied separately on each head of income. There is only one assessment and the same is made after the determination of the total income. Therefore the benefit provided under sections 71 and 72 of the Act cannot be denied simply on presumptions, without there being any cogent reason and relied upon Hon’ble Madras High Court judgment in the case of CIT v. Chensing Ventures [2007] 291 ITR 258 and Hon’ble Gujarat High Court judgment in the case of CIT v. Shilpa Dyeing & Printing Mills (P.) Ltd. Thus, the assessee requested the A.O. to assessee the correct income. However, the Assessing Officer was not satisfied with the above reply made addition of Rs.1.25 crores u/s. 69 and taxed r.w.s. 115BBE of the Act and demanded tax thereon.
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.
A.Y. 2015-16 Page No 4 Tahoora Proteins vs. ITO
Aggrieved against the appellate order, assessee is in appeal before us raising the following Grounds of Appeal:
1. The learned CIT (A) has erred in law and on the facts of the appellant's case in confirming addition of 1,25,00,000/-U/s 69 of the Act as undisclosed income.
2. 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.
3. 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.
4. 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.
5. 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 A.Y. 2015-16 Page No 5 Tahoora Proteins vs. ITO adjustments and treated the excess stock income of Rs. 1.25 crores was taxed u/s. 69 of the Act and also not allowed set off of brought forward losses and depreciation claimed amounting to Rs.87,60,982/-.
5.1. 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.
A.Y. 2015-16 Page No 6 Tahoora Proteins vs. ITO 5.2. The Hon’ble Jurisdictional High Court in the case of Shilpa dyeing & Printing Mills Ltd. (cited supra) it was held as follows: “Section 71, of read with sections 69 and 14, of the Income-tax Act, 1961 Losses Intra head set off [Set off against undisclosed income] - Whether for Income declared in survey to be taxed, it has to fall under one of heads of income under section 14 and cannot be taxed separately - Held, yes - Whether, therefore current year loss can be set off against undisclosed income declared in survey - Held, yes [Para 10] [In favour of assessee)” 5.3. Further Co-ordinate Bench of this Tribunal in the case of M/s. Fashion World vs. ACIT in 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.
Order pronounced in the open court on 19-12-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 19/12/2025 A.Y. 2015-16 Page No 7 Tahoora Proteins vs. ITO Rajesh आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद