PRAKASH ASHOKBHAI RANINGA,PORBANDAR vs. PRINCIPAL COMMISSIONER OF INCOME TAX, JAMNAGAR

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20) case was selected for compulsory scrutiny and the notice u/s. 143(2) of I. T. Act, 1961 was issued and served on 25.09.2020 through ITBA. The assessee’s case was centralized and transferred to this office vide order u/s. 127(2) of the Act issued by the Ld.PCIT, Jamnagar vide dated 01.02.2021. a notice u/s. 142(1) of the Act was issued alongwith a questionnaire dated 17.02.2021 requesting to furnish the compliance in the matter as required, online electronically in e-proceeding facility. The assessee has complied to the notice/ questioner issue time to time electronically. The submission made by the assessee examined carefully and assessment completed as under,

The fact discussed above the total income of the assessee is computed as under:

Income as per return filed Rs. 2,84,34,090/- Total income Rs. 2,84,34,090/-

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20) Rs.1,22,99,126/- (in Gold), Rs. 77,72,500/- (in Gold ornaments), Rs. 7,90,005/- (in Silver) and difference in cash of Rs. 11,055/- was found. During the course of statement recorded in this regard, you had admitted that you will disclose this entire unaccounted income of Rs. 2,08,72,686/- as additional income over and above your normal/regular income and due tax will be paid by you. However, you had not furnished the explanation about the source from which the unexplained stock had been purchased. 3.2. It is quite clear that you admit that you have unaccounted income of Rs 2,08,72,686/- as discussed above during the course of survey proceedings u/s 133A of the Act on 07/02/2019 and no manner of earning the same has been admitted except plainly stating that it is your business income. Thus, it is undisputed fact that you have some unaccounted excess stock and the manner of earning the same has not been admitted / explained. It is seen that you had declared the disclosure amount as your regular business income of Rs. 2,08,72,686/- in the return of income filed for the AY 2019-20. As such, the entire unaccounted income of Rs 2,08,72,686/- is required to be taxed as per the provisions of section 69 of the Act r.w.s. 115BBE of the Act as the manner of earning the excess stock in question has not been admitted/explained by you.”

1) During the survey proceedings at the business premises of the assessee, certain stock was found which was much more than that shown in assessee's books of account.

2) As on date of survey proceedings, such investments (excess stock) are not recorded in the books of accounts, maintained by the assessee, for any source of income.

3) The assessee has not explained/furnished the nature and source of acquisition of excess / unaccounted stock (investments).

4) As on date of survey, the excess stock is unaccounted and the assessee has not furnished any satisfactory explanation for the source of the investment in excess stock.

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20) Thus, all the conditions of section 69 are satisfied in the case of the assessee and accordingly, unaccounted stock of Rs. 2,08,72,686/- required to be taxed as per the provision of section 69 r.w.s. 115BBE of the Act.

8.1 During the course of hearing, the Ld. AR of the assessee submitted that survey was conducted for difference in valuation of the stock as physically taken and stocks as recorded in the books of account , and the assessee has admitted that the additional income of Rs. 2,08,61,631/- on account of discrepancies found in valuation stock of gold and silver ornaments. The assessee recorded that additional income is a part of business income.

8.2. A show-cause notice issued by the Ld. PCIT, the assessee has reply in details. The Ld. AR requested the business income shown and taxed income shown in the Return and income assessed by the Ld. Assessing Officer as business income. There is no incriminating material found during the survey proceeding. Hence, that the order of the Ld. PCIT may kindly be quashed.

9.1 We have heard both the parties and material available on record. We noted that, there was survey operation u/s. 133A on 07.02.2019 at the business premises of the assessee and the discrepancy found in stock of Gold and Silver during the survey proceedings. During the survey is specifically question asked for, and the same is reproduced;

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20) “Question:- Income offered for taxation by you vide Ans. 26, 28 & 29 comes to Rs.2,08,61,631/- which attracts provision of Section 115BBE r.w.s. 69B of IT. Act. Do you agree with this? Answer:- No, as per my opinion the excess stock found during the survey reflects are business income and same is not covered by the provision of section 69B, and hence offer to pay tax as per the regular slab applicable to individual i.e. @ 30% i.e Rs. 62,58,490/-. This tax is over and above advance tax already paid on my regular income."

9.2. We further noted that the assessee has filed return of income declaring net income of Rs. 2,84,34,090/- including the income surrendered during the survey amount of Rs. 2,08,61,631/- (copy of computation income and payable amount for AY 2019-20). The same is placed on record. We further noted that additional income is shown as per Audit Report. The Ld. AO issued a show cause notice on 08.09.2021, during the course of survey proceedings undisclosed income of Rs. 2,08,72,686/- was found which assessee have offered for taxation.

9.3. The assessee has further submitted that the assessee has accepted the view of survey authority in respect of income and offered for tax

• Disclosure on account of Stock (Gold) - Rs. 2,00,71,626/- • Disclosure for unaccounted Sales (Silver) - Rs. 7,90,005/-

The details of the above income is available with Income Tax Department as the same has been confirmed by the assessee as business income of F. Y. 2018-19 and which was offered to tax as income of the assessee. The details can be verified from the statement reordered of the assessee during the course of survey proceedings.

9.4. We noted that assessment order completed by the Assessing Officer, wherein the Assessing Officer, i.e., (DCIT/ACIT Center -2, Rajkot) is consider the reply of the assessee filed electronically and assessed income on the basis of Returned Income.

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20)

9.5. We noted that number of judgement reported and has been given opinion that on declaration/surrendered, about excess stock which is business of gold and silver ornaments, the assessee noted during the survey proceeding that the excess stock is consider to be normal income of business. We have relied upon the judgement, • (ii) The Hon'ble Rajkot ITAT in case of Harkishan Narottamdas Chokshi v. The Pr. CIT, Jamnagar-judgement dated 04.06.2024 in for AY 2019-20) 49 of 2003)

" We find that the Ld. AO has passed a well-reasoned order, after considering the facts and circumstances of the assessee’s case and since the assessee has already declared as “business income” and the same is duly accepted by the Ld. AO, the Ld. PCIT has erred in law by invoking the revision of the assessment order u/s. 263 of the Act. hence, the grounds taken by the Ld. PCIT for invoking s. 263 is hereby not accepted. We, thus, allow the appeal of the assessee.”

• (iii) Hon'ble Rajkot ITAT in case of Shree Murlidhar Jewellers vs. The Pr. CIT-4, Jamnagar- judgment dated 02.08.2023 in for A.Y. 2016-17, are held that;

“We are not in agreement with the Id.Pr.CIT and we find that the assessee has made out a good case before us that exercise of revisionary jurisdiction under section 263 of the Act in the present case was not in accordance with law. We agree with the ld.counsel for the assessee that in view of the fact of the case that disclosure was on account of unaccounted stock of business of the assessee and considering various judicial decisions as cited by the ld.counsel for the assessee before us, the view taken by the AO that disclosure represented business income of the assessee undeniably was a plausible view. The Ld.DR was unable to controvert the same before us. Further we find that this position is fortified by the fact that in the preceding year an identical disclosure made on account of excess stock by the assessee was treated by Pr. CIT that the same had been treated so in the light of the admission of the partner of the assessee-firm in the said year, while admission made in the impugned year is different, we find is not of much consequence. The fact which is relevant, and which we find identical in both the years, admittedly is that there was excess stock of undisclosed business income would not suffice e to determine its character whether business income or disclosed investment. The statement therefore is not a determinative factor for ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20) determining its character and therefore has been wrongly treated as a distinguished fact by the Ld. PCIT for holding that the decisions of the Ld. CIT(A) in the preceding year was not applicable to the impugned year”

• (iv) Hon'ble Rajkot ITAT in case of Jayshree Sarees vs. PCIT-1. Rajkot judgment dated 24.04.2024 in for A.Υ. 2018-19, are held that,

“On going through the facts of the instant case, we are of the considered view that this is not a fit case for revising the order passed by Ed. Assessing Officer by taking recourse to 263 proceedings. In this case, we observe that during the course of survey conducted at the premises of the assessee, certain excess stock was found, which was admitted to be the undisclosed business income of the assessee. by the main partner in the assessee firm. It is not the case of the Department that certain cash/jewellery / other income etc. was found which could be attributed as the business income of the assessee. As per the report by the survey team, the excess stock was a mixed stock and was not separately and clearly identifiable. Therefore, in our considered view, the said undisclosed excess stock should normally presumed to be the business income We of the assessee only”

In the result, both the appeals of the assessees (ITA No. 264 & 265/Rjt/2024 for AY 2019-20) are allowed.

ARVIND DURLABHJI JOGIA v. PCIT (AY 2019-20)

Order pronounced in the open court on 02 -05-2025