2022 (6) TMI 1413 - AT - Income Tax

Addition u/s 69A r.w.s.115BBE - assessee has not been able to explain any source qua the excess-cash - HELD THAT - The assessee was found to be owner of money i.e. excess cash, the excess cash was not recorded in the books of account of any source (i.e. books of business in present case) maintained by the assessee and the assessee has himself admitted that the excess cash found from his premise is earned from undisclosed sources, therefore he is unable to give explanation of its source. Thus, we find that all ingredients of section 69A are satisfied from the material held on record i.e. the statement of assessee. Being so we do not have iota of doubt in the application of section 69A. The impugned excess cash found by the revenue during survey proceeding attracted section 69A as well as section 115BBE of the act. Therefore, we agree that the lower authorities have rightly invoked / confirmed that the excess cash is taxable u/s 69A read with section 115BBE. The conclusions taken by lower authorities do not require our interference. Decided against assessee. Unexplained stock - physical stock was found to be short - AO treated this short-stock as unaccounted sales out of books of account, estimated profit @ 10% and thereby made an addition - HELD THAT - We observe that the difference is very nominal and it can happen despite of all care in carrying out physical verification as well as preparation of books. We observe that the tax effect on Rs. 9,962/- shall be very negligible. Hence in order to impart a justice and taking a holistic and practical view, the addition deserves to be deleted. Decided in favour of assessee.

Issues Involved:
1. Characterization of excess cash found during survey as business income or undisclosed income under section 69A.
2. Applicability of section 115BBE for higher tax rate on additional income.
3. Addition of gross profit on shortage of stock.

Issue-wise Detailed Analysis:

1. Characterization of Excess Cash Found During Survey:

In ITA No. 245/Ind/2021, the assessee, engaged in the trading of grocery items, contested the treatment of excess cash of Rs. 7,57,290/- found during a survey under section 69A of the Income Tax Act. The assessee argued that the excess cash should be treated as business income, taxable at normal rates, rather than undisclosed income taxable at higher rates under section 115BBE. The Tribunal noted that the assessee admitted the excess cash was from undisclosed sources and could not explain its origin, satisfying the conditions of section 69A. Thus, the Tribunal upheld the lower authorities' decision to tax the excess cash under section 69A read with section 115BBE.

In ITA No. 246/Ind/2021, the facts were similar, with excess cash of Rs. 2,68,555/- found during a survey. The Tribunal dismissed the assessee's grounds, following the same rationale as in ITA No. 245/Ind/2021.

In ITA No. 247/Ind/2021, the assessee contested the treatment of excess cash of Rs. 8,15,000/- found during a survey. The Tribunal, applying the same reasoning as in ITA No. 245/Ind/2021, dismissed the assessee's grounds.

2. Applicability of Section 115BBE for Higher Tax Rate on Additional Income:

In all three cases (ITA No. 245/Ind/2021, ITA No. 246/Ind/2021, and ITA No. 247/Ind/2021), the Tribunal examined the applicability of section 115BBE, which mandates a higher tax rate for income referred to in sections 68, 69, 69A, 69B, 69C, or 69D. The Tribunal found that once the total income includes income under section 69A, the tax is payable at the rate specified in section 115BBE. The Tribunal upheld the lower authorities' decisions to apply the higher tax rate under section 115BBE for the excess cash found during the surveys.

3. Addition of Gross Profit on Shortage of Stock:

In ITA No. 246/Ind/2021, the assessee contested the addition of Rs. 9,962/- as gross profit on a stock shortage of Rs. 99,624/-. The Tribunal observed that the difference was nominal and could occur due to hasty physical verification or sudden preparation of books. Considering the negligible tax effect, the Tribunal directed the deletion of the addition of Rs. 9,962/-, allowing this ground of the assessee.

Conclusion:

The Tribunal dismissed ITA No. 245/Ind/2021 and ITA No. 247/Ind/2021, upholding the characterization of excess cash as undisclosed income under section 69A and the application of section 115BBE for a higher tax rate. In ITA No. 246/Ind/2021, the Tribunal partly allowed the appeal by directing the deletion of the addition of Rs. 9,962/- for gross profit on stock shortage but upheld the treatment of excess cash under section 69A and section 115BBE.

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