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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld.
Commissioner of Income-tax (Appeals)-5, Ludhiana, (in brevity ‘the CIT (A)’) order passed u/s 250 (6) of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2019-20. The impugned order was emanated from the order of the ld. ACIT/DCIT, Central Circle, Amritsar, (in brevity the ld. AO) order passed u/s 143(3) of the Act.
The assessee has taken the following grounds:
“1. That the order of the Learned ACI1 making additions and likewise Ld. CIT(A) confirming the same is wrong, illegal and against facts.
2. That the Ld. AO erred under law and facts in making addition of Rs. 37,46,491/- on account of surrender of stock and cash in view of the fact that 1 /4th of the total surrendered amount should be assessed in the hands of the assessee and remaining amount has been duly taxed in the hands of other family members and taxes has been paid thereon and likewise Ld. CIT(A) confirming the same is wrong, illegal and against facts.
That the value of stock at the time of survey taken by the survey team was as per current market value of gold ornaments however the assessee was in the business since long about 25 years and the valuation of gold ornaments should have been made on cost or market price whichever is lower at the acquisition in the past.
4. That Ld. AO has not appreciated the fact that surrender was agreed in the hands of four persons to avoid litigation, buy peace and to make amicable settlement with the department.
5. That the Ld. AO erred under law and facts in making addition of Rs. 27,20,300/- on account of opening stock taken in the books of account and likewise Ld. CIT(A)confirming the same is wrong, illegal and against facts.
6. That the Ld. AO has not appreciated the balance sheet as on 01/04/2018 which is sum total of individual balance sheet as well as the balance sheet of the dissolved partnership firm.
7. That the opening stock taken in the books of accounts is as per return of income, capital account and balance sheet maintained year wise since long.
8. That the Ld. CIT(A) has not appreciated the facts of the case explanation offered and statement recorded during survey and proceeded to make additions arbitrarily.
That the Assessing Officer only on the basis of statement of the assessee recorded during the course of survey in the absence of any adverse material to substantiate the addition.
That AO has erred in law and on facts which observing that provision of Sec 115BBE are applicable. The assessee is business concern and as such investment if any will be from business activity.”
3. The assessee has also raised the revised ground which is reproduced as below:
“That Learned Assessing Officer has erred in law and on facts while passing the order without giving reasonable opportunity of being heard.
Accordingly, it is prayed that assessment framed be quashed or such other relief as may be permissible be granted.
The above-mentioned additional ground is purely legal in nature for which all relevant facts are on record. Accordingly, it is prayed that this ground may kindly be admitted and adjudicated.”
Brief facts as culled out from the records are that the survey was conducted in assessee’s premises on 08.02.2019. The assessee is a proprietor of M/s Jasbir Jeweller, Ajnala and doing business of the jewellery. During survey a difference stock and cash was found. The assessee declared the opening stock amount to Rs. 39,49,020/-. The assessee claimed the opening stock of personal business amount to Rs. 27,20,300/- which was out of Balance sheet and declared stock in balance sheet amount to Rs. 12,28,719/- the stock value in together works out to Rs. 39,49,020/-. The ld. AO rejected the stock of personal business as claimed by assessee and added back the stock amount to Rs.27,20,300/- with total income. The addition was made undisclosed investment from unexplained source of excess cash and excess stock as per provision of section 69 and 69A of the Act amount to Rs.37,46,491/-. Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) after considering the submission of the assessee, passed the order in favour of the revenue. Being aggrieved assessee filed an appeal before us.
The ld. AR for the assessee filed a written submission which are kept in the record. The ld. AR first invited our attention in para nos. 3.5 and 3.6 of the assessment order which are extracted as below:
“3.5 Assessee has failed to furnish any reply. Assessee has also failed to explain the source of additional undisclosed income offered with supporting documents and to explain why entire investment of Rs.49,95,323/- in the form of excess stock and cash should not be treated as investment from unexplained sources and be taxed as - per provisions of Section 115BBE of the I.T.Act. Earlier in compliance to questionnaire issued vide notice u/s 142(1) of the I.T.Act dated 21.01.2021, assessee had furnished part reply. Assessee was given further opportunity vide notice u/s 142(1) of the I.T.Act dated 12.04.2021, 06.09.2021. But assessee has failed to make any compliance.
3.6 Considering all the facts, it is evident that assessee had surrendered total amount of Rs.Rs.49,95,323/- on account of excess stock & excess cash found during the year, but has disclosed only Rs.12,28,468/- on account of surrendered excess stock and Rs.20,364/- on account of surrendered excess cash in the Profit & Loss account. Thus, total of Rs.12,48,832/- i.e 1/4thhas only been disclosed as against surrender amount of Rs.49,95,323/-. Accordingly, balance amount of surrendered excess cash found during the survey I.e. Rs.61,093/-(Rs 81,457/- -Rs 20,364/-) is being added to the income of the assessee as undisclosed investment from unexplained sources in the form of cash as per provisions of Section 69A of the I.T.Act and balance amount of surrendered excess stock i.e. Rs.36,85,398/-(49,13,866/- - 12,28,468/-) is being added to the income of the assessee as undisclosed investment from unexplained sources in the form of excess stock as per provisions of Section 69 of the I.T. Act. Amount of Rs.12,28,468/- on account of surrendered excess stock and Rs.20,364/- on account of surrendered excess shown by the assessee as additional income while filing ITR is also being treated as undisclosed investment from unexplained sources in the form of excess stock and stock as per provisions of Section 69 and 69A of the I.T.Act respectively.
[ Addition : Rs.37,46,491/-]”
5.1 The ld. AR vehemently argued and placed that the ld. AO without considering our submission and without allowing the reasonable opportunity the addition was made during the impugned assessment year. He further draws our attention in para 5 of the assessment order which is extracted as below:
“5. During assessment proceedings, it is found that as per ITR of the assessee for the A.Y. 2018-19, Closing Stock as on 31.03.2018 is ‘Nil’ but for the A.Y. 2019-20, assessee has shown Opening Stock of Rs.39,49,020/-. The same was confronted to the assessee. It is submitted that during the F.Y. 2018-19 Sh. Jasbir Singh Was partner of the Firm M/s Jasbir Jewellers which had been closed on 31.03.2018. Copy of dissolution deed and Balance-sheet of Firm M/s Jasbir Jewellers is also submitted. As per this Balance-sheet, closing stock as on 31.0312018 was 12,28,719/-. It has further been submitted that Sh. Jasbir Singh was also doing business in personal capacity and was having stock of Rs.27,20,300/-. It is observed from the ITR of the assessee for A.Y. 2018-19 that Sh. Jasbir Singh has shown business income of only interest and share from partnership Firm. Thus, the assessee’s profit of having stock in personal capacity is being rejected. Although it was partnership Firm, but taking lenient view, being family concern, Opening stock to the extent of Rs. 12,28,719/- is being accepted. Thus, the assessee has failed to explain source of Opening stock credited in Books of account to the extent of Rs.27i20,300/-. The same is considered as unexplained as per provisions of Section 68 of the I.T.Act and being added to the Income of the assessee as deemed income as per provisions of Section 68 of the I.T.Act to be taxed as per provisions of Section 115BBE of the I.T.Act. Penalty proceedings u/s 271 AAC of the I.T.Act, 1961 is separately being initiated being deemed income as per provisions of section 68 of the I.T.Act.
[ Addition: Rs.27,20,300/-]”
5.2 The ld. AR further placed a detailed statement related to denial of reasonable opportunity during assessment proceeding related to issuance of the notice by the ld. AO. The statement is duly extracted as below:
“The AO has wrongly observed that no proper compliance has been made by the appellant as also mentioned in the notice dated 14/09/2021 which is reproduced below:
Date of Notice Date of Compliance Compliance Status Submissions by the assesse 24/12/2020 31/12/2020 Non-Compliance Notice was issued by the Income Tax Officer, Ward 2(1] Amritsar due to structural changes. Case was transferred to Central Circle Amritsar. Also mentioned in the assessment order opening para. Hence AO is not justified in his observations. 21/01/2021 28/01/2021 Non-Compliance Case was adjourned to 03/02/2021 in para I of the assessment order AO observed "In response to notice issued assesse filed reply to ITBA 01/02/2021 15/02/2021 Non-Compliance Reply was filed on 15/02/2021 (PBP 132 and 133). Hence AO is not justified in,his observations 12/04/2021 15/04/2021 Non-Compliance Assesse did appear. The AO could not take up the case as he was busy in time barred cases. Hence the observations are incorrect. 06/09/2021 13/09/2021 Non-Compliance The notice was issued on 09/02/2021 for 13/09/2021 The following notices were issued: Notice dated 09/09/2021 for 13/09/2021 Notice dated 14/09/2021 for 17/09/2021 Notice dated 16/09/2021 for 23/09/2021 All these notices were received along with assessment order. No email was received by the appellant.”
The ld. DR vehemently argued and relied on the order of the revenue authorities.
We heard the rival submission and considered the documents available in the record. In the assessment order the ld. AO specifically mentioned that the assessee was failed to explain the additional source of undisclosed income he appeared with supporting documents and to explain, had not entire investment of Rs.49,95,323/- inform of excess stock and cash during assessment proceeding. The ld. AR explained that during assessment, the reasonable opportunity was denied due to the improper issuance of the notice. Therefore, the assessee claimed that he had not received the notice in any mail during the proceeding.
We find that the opportunity should be allowed to the assessee considering the books of accounts. The opportunity should be given for ascertaining theundisclosed stock after due verification of the claim of the assessee and if so found correct by the AO.The ld. DR had not made any objection against the assessee’s prayer. We are, therefore, of the opinion that interest of justice would be sub served if the impugned order is set aside and the matters are remitted back to the ld. AO for consideration thereof afresh. We are not expressing any views on the merits of the case so as to limit the appellate procedure before the Ld. AO. Needless to say, theassessee should get a reasonable opportunity of hearing for setting aside proceedings.
In the result, appeal of the assessee is allowed for statistical purposes.