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Facts
The Revenue filed an appeal against the order of the CIT(A) for AY 2018-19. The appeal was filed with a 5-day delay, which was condoned by the tribunal. The case involves an assessee engaged in the hosiery business, who declared a total income of Rs. 99,20,700/- for the AY 2018-19. During a survey, impounded documents revealed a property purchase where the registered value was significantly less than the actual consideration paid.
Held
The tribunal held that the unexplained investment of Rs. 89,00,000/- was funded from accumulated unaccounted income from the assessee's garment business, which was accepted by the AO in a prior AY. Regarding the stock difference addition of Rs. 74,26,335/-, the tribunal found that the CIT(A) relied on additional evidence not presented to the AO, violating Rule 46A. Therefore, this issue was remitted back to the AO for fresh adjudication.
Key Issues
Whether the unexplained investment in property and the addition for stock difference were rightly deleted by the CIT(A) or if they should be restored to the AO.
Sections Cited
Sec. 133A, Sec. 142(1), Sec. 143(3), Sec. 69B, Sec. 115BBE, Sec. 69, Sec. 292C(1), Rule 46A
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
1. This Revenue Appeal is filed against the order of the Learned Commissioner of Income Tax - (Appeals)-20, Chennai, [herein referred to as the ‘Ld. CIT(A)’] for the Assessment Year (“AY”) 2018-19 arising out of the final assessment order of the assessing officer passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 17.08.2021.
At the outset, we find that there is a delay of 5 days in filing the appeal filed by the revenue and the revenue explained the reasons for delay in filing the appeal. The revenue has filed affidavit stating the reasons for delay in filing the appeal is due to Misc. records in the case of the assessee were mixed with other cases which led to delay in tracing the records. Hence, there was a delay. After considering the affidavit
:-2-: ITA. No:1661/Chny/2025 filed by the revenue and also hearing both the parties, we find that there is a reasonable cause for the revenue in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit the appeal filed by the revenue for adjudication.
The brief facts of the case are that the assessee along with his wife Smt.Mani Vijaya and his son Shri Mani Vijay Balaji, are engaged in the business of manufacturing of hosiery garments. A Survey u/s.133A of the Act was conducted on 25.08.2018 at the business premises of the assessee and his family members. Subsequently, the assessee filed the return of income for the AY 2018-19 on 31.10.2018 declaring total income of Rs.99,20,700/-. The case was selected for scrutiny and notice u/s.142(1) of the Act was issued on 27.02.2021 and 07.06.2021.
During the course of survey, registered documents and agreements pertaining to purchase of property were impounded vide annexure RMT/BS/B&D/IMP/Item 1 to 3. It was found from the impounded material that the assessee had purchased a property measuring 6,610 Sq.Ft. of land with building in the name of assessee and his wife Smt. M.Vijaya vide document No.9388/2017 dated 16.10.2017. The total consideration paid by the assessee and his wife for the purchase of above property was Rs.2,16,00,000/- and the said property was only registered with the Sub Registrar Joint- 1, Tiruppur, for an amount of Rs.77,00,000/-. The excess payment of Rs. Rs.1,39,00,000/- was on money paid by the assessee and his wife for purchase of property. In the sworn statement recorded on 25.01.2018, the assessee had admitted that he had partly paid Rs.50,00,000/- out of pre-closure of fixed deposits held in Anna Co-operative House Building Society Ltd in the name of assessee and his family members, which was offered to tax by the assessee/his family members in their returns filed for the AY 2017-18. The balance of Rs.89,00,000/-, being unaccounted business income, was offered to tax by the assessee in his return of income filed for the impugned AY 2018-19, under the head income from other sources.
The AO however, in the impugned AY, rejected the contention of the assessee that the sum of Rs.89,00,000/- was unaccounted business income and had sought to :-3-: ITA. No:1661/Chny/2025 tax the said amount as unexplained income u/s.69B of the Act at rates specified u/s.115BBE of the Act.
The second addition made by the AO was in respect of difference in stock found at the time of survey. During the survey proceedings, the physical stock was found from the business premises of the assessee and his wife and son. The assessee had in his sworn statement accepted that the said physical stock found was unaccounted. Accordingly, the AO completed the assessment making addition of Rs.74,26,335/- in respect of unaccounted stock.
The assessment was completed by the AO u/s.143(3) of the Act on 17.08.2021 by making the following additions/ adjustments:
i. Unexplained investment u/s.69B of the Act of Rs.89,00,000/- on account of purchase of property. ii. Unexplained investment u/s.69 of the Act of Rs.74,26,335/- on account of excess stock found at the time of survey.
Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A). The ld.CIT(A) allowed the appeal filed by the assessee on the following grounds:
i. The ld.CIT(A) accepted that the unexplained investment of Rs.89,00,000/- was funded from accumulated unaccounted income generated over years from the assessee’s garment business. The ld.CIT(A) further noted in his order, that the contention of the assessee that the unaccounted income was from his business sources has been accepted even by the AO in the AY 2017-18. The ld.CIT(A) thus allowed the appeal filed by the assessee holding that the assessee has been carrying on business for past many year and the AO has also accepted the contentions of the assessee. ii. In respect of the alleged excess stock, the ld.CIT(A) observed that the assessee and his relatives did not maintain regular books of accounts (01.04.2017 to 25.01.2018) on the date of survey i.e 25.01.2018. He further observed that the said stock was duly accounted by the assessee and his relatives in their regular books of accounts after the date of survey. It was recorded in the ld.CIT(A)’s order that the assessee had recorded Rs.74,26,335/- as closing stock on 25.01.2018 and the same was brought forward as opening stock on 26.01.2018 and the gross profit margins have remained consistent. He thus deleted the addition made by the AO and allowed the appeal.
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Aggrieved by the order of the Ld.CIT(A), the revenue filed this appeal which is taken up for adjudication. The Grounds of appeal raised by the revenue is reproduced below:
The Ld. CIT(A) order is not acceptable as the assessee has not reconciled as to how the gross profit and gross profit ratio of the assessee for the period 01- 04-2017 to 25-01-2018 and 26-01-2018 to 31-03-2018 remains unaffected when there is unexplained income which has to be considered for arriving at correct Total Income without giving any opportunity under Rule 46A of the IT Rules 1962 to reply to the assumption during the course of the appeal proceedings.
2. The Ld. CIT(A) erred in holding that the investment in immovable property found at time of survey is out of business income is not based on any tagging of income or such related corroborative evidences available on record but based on a surmise that there is a possibility that the same is out of business income which assumption is not supported by any evidence found on record or during the course of survey, further the onus is on the assessee to prove that impugned amount invested is out of the business income earned not reported for tax purposes failing which the presumption is that the same is undisclosed and has to be treated accordingly.
3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of the learned CIT(A) may be set aside and that of the Assessing officer be restored.
4. The Ld. CIT(A) erred in deleting the addition by not taking cognizance of section 292C(1) which reads “Where any books of accounts, other documents, money , bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed (ii) that the contents of such books of accounts and other documents are true.
As regards the first issue i.e. addition of Rs.89,00,000/- u/s.69B of the Act, the ld.DR for revenue submitted before us that the assessee had not placed any material before the lower authorities to evidence that the money was earned out of his business. The ld.DR submitted that once the income is not recorded in the books of the assessee, the same would attract section 69B of the Act.
10.1 The ld.DR argued vehemently and supported the order of the AO.
On the other hand, the ld.AR submitted that the addition u/s.69B of the Act cannot be sustained. The ld.AR submitted that even in the course of the survey proceedings, the assessee had only submitted that the income was unaccounted
:-5-: ITA. No:1661/Chny/2025 business income. The ld.AR submitted that the major source of income for the assessee and his family is out of their garment business. The ld.AR further submitted that the AO himself in the assessment order for A.Y.2017-18 has accepted the income offered by the assessee in the course of survey as business income. She therefore submitted that the order of the ld.CIT(A) is required to be upheld.
We have heard the rival contentions and perused the material available on record and gone through the order of the AO as well as the ld.CIT(A). The assessee is an individual carrying on the business of manufacturing of hosiery in the name and style of RM Tex. It is undisputed fact that the assessee is assessed to tax for past several years and his only source of income is “Business income”. In such a case, whatever discrepancies are noted during the survey conducted, the same would be part and parcel of business operations and could be considered to be Business income only and not from any other source. Therefore, we do not find any perversity in the decision taken by the ld.CIT(A) in treating the said amount as business income. Hence, the grounds raised by the revenue in ground No 2 is dismissed.
As regards second issue, i.e. addition of Rs.74,26,335/- made u/s.69 of the Act on account of stock difference, the ld.DR submitted that the assessee had not submitted any details before the AO. The ld.DR submitted that the ld.CIT(A) has allowed the appeal based on fresh material, which was not part of records before the AO. The ld.CIT(A) completed the proceedings, without giving the AO an opportunity to examine the additional evidence and thus there is a violation of Rule 46A. The ld.DR further submitted that the Assessee in his sworn statement had admitted Rs.74,26,335/- as unaccounted physical stock found at the time of survey in the business premises of the assessee and his family members. Further the Ld.DR contended that the assessee has failed to reconcile how the gross profit and gross profit ratio remained unchanged for both periods despite the existence of unexplained income.
The ld.AR on the other hand submitted that there was no additional evidence that was placed before the ld.CIT(A). The assessee had only placed statement of gross profit from the period 01.04.2017 to 25.01.2018 and 26.01.2018 to 31.03.2018.
:-6-: ITA. No:1661/Chny/2025 The ld.AR submitted that the statement was part of financials which were available before the AO. She further submitted that the assessee, his wife and son are assessed to tax under the same jurisdictional officer and all the data are very much available before him. She submitted mere reproduction of financials in a different form tabultated will not amount to “Additional Evidence” and hence there is no violation of Rule 46A. Further she submitted that the gross profit statements worked out by the assessee shows that the assessee and his family members had brought the value of closing stock of Rs.73,88,355/- as on the date of survey in their respective books of accounts. The same amount was also considered as opening stock as on 26.01.2018 and thereafter the books of accounts were closed as on 31.03.2018 for the A.Y.2018- 19. Therefore, the assessee had offered an amount of Rs.73,88,355/- as the total value of closing stock of all the 3 concerns together as on the date of survey after considering the opening stock, purchase and sales made, the assessee had offered the corresponding income for the year under consideration. Further the gross profit and the gross profit ratio of the assessee for the period 01.04.2017 to 25.01.2018 and 26.01.2018 to 31.03.2018 remains unaffected, which clearly evidences that the stock is duly accounted. She thus submitted that the addition is without any basis.
We have heard the rival contentions, perused the material available on record and gone through the orders of the AO as well as the ld.CIT(A). The revenue had alleged that the annexure A and Annexure B to the written submissions placed before the ld.CIT(A) were additional evidences which were not part of records before the AO. We have perused the copies of the said annexures, which are part of order of the ld.CIT(A). We find that the said annexures not only contain details of the assessee, but also details of concerns run by his wife and his son. We are of the considered opinion that the said annexures are nothing but fresh evidence before the ld.CIT(A). We do not agree with the submission of the ld.AR that since all the three assesses are assessed under the same AO, the said data would not amount to additional evidence. Therefore, we are inclined to accept the contention of the ld.DR and hold that there is violation of Rule 46A. We thus remit back the issue on addition of Rs.74,26,335/- to the file of the JAO to adjudicate the same on merits after considering the details placed by the assessee before the ld.CIT(A). Since the issue is remitted back to the AO, we
:-7-: ITA. No:1661/Chny/2025 do not make any comment on the merits of the issue. In result the ground No.1 is allowed for statistical purposes.
15.1 Since the issues are decided in Ground No 1 and 2, Ground No 3 and 4 become academic and dismissed as infructuous.
In the result, the appeal is partly allowed for statistical purpose.
Order pronounced in the court on 03rd February, 2026 at Chennai.