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Facts
During a survey, a stock difference of Rs. 32,77,500 was detected. The assessee offered this amount as income under 'Income from Other Sources' and paid tax. However, the Assessing Officer (AO) added this amount again, and the CIT(A) confirmed it. The assessee argued this was a double addition and the entry was correctly made by debiting purchases and crediting capital account.
Held
The Tribunal noted that while the assessee claimed to have paid tax on the excess stock, the amount of Rs. 32,77,500 was also included in purchases, making the addition tax-neutral. Since the assessee claimed expenditure on account of purchases to this extent and the addition did not appear to have been subjected to any tax, the Tribunal found no justification for relief.
Key Issues
Whether the addition of Rs. 32,77,500 on account of stock difference, which was already offered as income, amounts to double addition and if the entry in the books was correctly made.
Sections Cited
133A, 143(3), 250, 115BBE
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Income Tax Appellate Tribunal, PATNA BENCH AT KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
order
: 08-December-2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2015-16 dated 10.05.2024, which has been passed against the assessment order u/s 143(3) of the Act, dated 29.12.2017.
The assessee is in appeal before the Tribunal raising the following grounds of appeal:
1. For that the learned CIT(A) has erred in upholding the order of Assessing officer passed u/s 143(3) of the I.T. Act, 1961 wherein the income has been determined at Rs. 1,07,18,760/- as against correct income of Rs. 74,41,260/-. I.T.A. No.: 465/PAT/2024 Assessment Year: 2015-16 Gopaljee Prasad.
2. For that the learned CIT(A) has erred in law and fact in confirming the addition of Rs. 32,77,500/- again which had already been declared by the appellant as income under the head Income from Other Sources in its Return of Income.
3. For that the learned CIT(A) has failed to appreciate that in the line of business of assessee old ornaments are purchased on eye estimation only and after getting its purity it results into short or excess stock. So, a physical verification of stock was carried out by the management well before survey and stock difference of Rs. 32,77,500/- was noticed for which entry in the books of accounts of Assessee was passed by debiting purchase account resulting into increase of Closing stock and crediting Capital Account and this amount has been offered for taxation under the head 'Income from other sources'.
4. For that the Assessing officer and also Ld. CIT(A) has erred in stating that the assessee has brought the undisclosed stock to the tune of Rs. 32,77,500/- into books by debiting closing stock and crediting Capital Account.
5. For that the Assessing officer and the Ld. CIT(A) has erred in stating that there is no justification for crediting purchase account with the amount of Rs.32,77,500/- when in fact Purchase Account has been debited which is verifiable from the Audited Trading and Profit & Loss Account. As mentioned in Assessment order incorrect entry involving purchase account is not correct at all and entry passed is correct in all respect.
6. For that the Assessing officer and the Ld. CIT(A) has not mentioned anywhere that entry passed by the assessee has resulted into escapement of income twice the amount of Rs.32,77,500/-, whereas in the Capital Account also credit is for Rs.32,77,500/- only besides normal business income of Rs.41,89,632/-.
7. For that the Assessing officer and Ld. CIT(A) has failed to appreciate that the assessee furnished separate Trading and Profit and Loss Account without taking stock difference of Rs.32,77,500/- in which Gross Profit and Net Profit remain the same at Rs.48,66,338/- and Rs.41,89,632/- respectively.
8. For that confirming addition of Rs.32,77,500/- is arbitrary unrealistic and has no leg to stand in law and therefore fit to be deleted.
9. For that the Appellant craves leave to add, alter, modify, vary, delete any grounds of appeal before or at the time of hearing, if necessary.” I.T.A. No.: 465/PAT/2024 Assessment Year: 2015
16. Gopaljee Prasad.
3. Brief facts of the case are that the assessee is an individual and the proprietor of M/s. Swarnalaya Jewellers and had filed his income tax return showing total income of ₹74,41,260/-. The case was selected for complete scrutiny under the manual category and notices u/s 143(2) and 142(1) of the Act were issued, in response to which the assessee submitted various documents called for. On 26.02.2015, the Income Tax Department conducted a survey u/s 133A of the Act at the business premises of the assessee and found that regular books of account were not found at the time of survey, the stock was inventoried as gold jewellery, silver, diamond and cash worth ₹36,655/- and also bandhak (pawn broking) business records were noted, along with cash memos evidencing considerable out-of-books sales; silver sales totalled to ₹4,07,466 and gold ₹19,83,828. The assessee submitted various documents, including Tax audit report, profit and loss accounts, stock statements, trial balances, capital accounts, ITR acknowledgement, NSC/LIC receipts, computation of income, and bank statements. The Assessing Officer (hereinafter referred to as the Ld. 'AO') examined the trading accounts with and without the re-appraisal of stock and found discrepancies, specifically that the gross profit ratio (GP) was unnaturally high in the year of stock disclosure. The balance sheet and capital account figures were meticulously scrutinized and a show cause notice was issued regarding unaccounted cash and unexplained entries totalling to ₹78,71,507/- and the total income was computed at ₹1,07,18,760/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who, vide order dated 10.05.2024, dismissed the appeal of the assessee and his finding is as under: “3.1. As evident from the findings of the AO elaborated above in the assessment order, the appellant sought to evade tax on the excess stock of I.T.A. No.: 465/PAT/2024 Assessment Year: 2015-16 Gopaljee Prasad. Rs. 32,77,500/- discovered during the course of survey action at the business premises, by inserting re-appraisal of stock claimed to have taken place on 13.01.2015 a month ahead of arrival of income-tax authorities for survey. During the appellate proceedings, no justification is filed in support of the claims made in the grounds of appeal. The appellant has uploaded attachments which include form 35, computation sheet, and bank statements which were submitted during the assessment proceedings and considered by the AO before drawing the above conclusion. However, during the appellate proceedings, there is no written submission to explain the discrepancy found in the trading account with respect to closing stock. It is also noticed that, inquiries conducted by the AO with respect to verification of sundry creditors did not yield any response from two parties nor any explanation was filed by the appellant with respect to the Purchase A/c. In these circumstances, the action of the appellant is apparent and the addition of 32,77,500/- is confirmed. 3.2 In the result, the appeal is treated as dismissed.”
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that there was a survey u/s 133A of the Act on 26.02.2015 in which stock difference of ₹32,77,500/- was found. The assessee himself offered this difference of stock for tax and paid 30% of tax but the Ld. AO again added a sum of ₹ 32,77,500/- by stating that the same had been introduced by the proprietor’s capital account. Our attention was drawn to page 8 of the paper book in this regard. The Ld. AR submitted that this is tantamount to double addition and therefore, stated that the requisite relief may be allowed.
6. The Ld. DR on the other hand, stated that before the Ld. CIT(A) no submission was made by the assessee to explain the discrepancy and drew our attention to page 3 of the assessment order in which the GP has been discussed. The disclosure was found to be tax neutral and the I.T.A. No.: 465/PAT/2024 Assessment Year: 2015-16 Gopaljee Prasad. addition was confirmed by the Ld. CIT(A) on account of lack of submission.
7. The Ld. AR in the rejoinder submitted that the assessee was asked by the Ld. AO to furnish three different trading accounts as mentioned at page 3 of the assessment order and the Ld. AO had taken incorrect sales. The assessee has filed the written submission, the extract of which is as under: “1. That a survey u/s 133A of the I.T. Act, 1961 was carried out in the shop premises of the assessee on 26.02.2015 in which the stock of the business was inventorised and a difference amounting to Rs. 32,77,500 was detected by the Authorised officer in absence of books of accounts, which was lying with the Munshi (Accountant) of the firm.
2. That in the line of business of assessee old ornaments are purchased on eye estimation only. After getting these ornaments in purity it results into short or excess weight. So, a physical verification of stock was carried out by management well before the survey and the stock difference of Rs. 32,77,500 was noticed for which entry in the Books of Accounts of assessee was passed by debiting purchase Account resulting into increase of closing stock and crediting capital Account.
3. That the assessee had furnished Return of income showing a Gross total Income of Rs. 75,12,049 which included Rs. 41,89,632 as business income and under the head income from other sources of Rs. 33,22,417 (Rs. 32,77,500 for stock difference offered for taxation u/s 115BBE at maximum marginal rate at 30% and no expenditure or allowance claimed as per sub section (2) of section 115BBE and Rs.44,917 as interest income). The computation of income and Acknowledgment of Return was furnished before the Assessing officer and also before the learned CIT(Appeal) (Paper Book Page No.5 & 6).
4. That the Assessing officer and also the learned CIT(Appeal) has wrongly held that the assessee had passed entry in Books of account for difference of stock of Rs. 32,77,500 by crediting Capital Account and debiting Closing Stock but the assessee had rightly passed entry by Debiting Purchases Account and crediting Capital Account by the said amount which was evident from the Books of Account and Audited Trading Account, Capital Account and Balance Sheet in the record of the Department (Paper Book Page No. 7 to 9). I.T.A. No.: 465/PAT/2024 Assessment Year: 2015-16 Gopaljee Prasad.
5. That the Books of Accounts of the assessee was accepted by the Assessing Officer. During the Assessment proceedings neither explanation was asked by the Assessing Officer nor mentioned anywhere in the order that how entry passed by the assessee in above respect is wrong and resulted into under statement of income twice the amount of Rs. 32,77,500 whereas in capital Account also credit is for Rs.32,77,500 only besides normal business income of Rs. 41,89,632.
6. That the Assessing officer and also the learned CIT(A) has wrongly held that with purchase and stock exit of Rs. 32,77,500 G.P. slippage 2.26%, thus this stock disclosure is not profit neutral.
7. That there is no difference in trading Account between the gross profit rate shown by the assessee after taking into account the difference of stock amounting to Rs. 32,77,500 in purchases Account and if no appraisal of stock had taken place in Trading Account. The gross profit rate and amount remain the same as 30.30% and Rs. 48,66,335 respectively.
8. That the assessee was asked to submit trading account as if no re- appraisal of stock had taken place for the following period. 01.04.2014 to 26.02.2015 27.02.2015 to 31.03.2015 01.04.2014 to 31.03.2015 The assessee had furnished the above period trading account without taking into account re-appraisal of stock which is lying in the record of the Assessing officer as under:- Trading A/c for the period of 01.04.14 to 26.02.15 To Opening stock 49,32,949.22 By Sales 1,30,85,664.50 To purchase 1,31,66,109.16 By Closing Stock 95,15,394-33 To Majduri 2,40,317-00 To Gross Profit 42,61,683.45 2,26,01,058.83 2,26,01,058.83 Trading A/c for the period of 27.02.15 to 31.03.15 To Opening stock 95,15,394.33 By Sales 29,72,178.00 To purchase 5,21,420.20 By Closing Stock 76,89,299.42 To Majduri 20,008.00 To Gross Profit 6,04,654.89 1,06,61,477.42 1,06,61.477.42 Trading A/c for the period of 01.04.14 to 31.03.2015 To Opening stock 49,32,949.22 By Sales 1,60,57,542.50 To purchase 1,36,87,529.36 By Closing Stock 76,89,299.42 To Majduri 2,60,325.00 To Gross Profit 48,66,338.34 (30.30%) 2,37,47,141.92 2,37,47,141.92 I.T.A. No.: 465/PAT/2024 Assessment Year: 2015-16 Gopaljee Prasad.