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2022 (1) TMI 683 - AT - Income TaxUnexplained investment u/s 69 - stock was not recorded in the books of account of the assessee and acquired out of unaccounted income - admission of undisclosed income - whether the provision of section 115BBE of the Act are applicable on the surrendered income? - HELD THAT - CIT(A) on examination of the fact, settled judicial precedence, also appreciating that the alleged income is business income earned by the assessee during the normal course of its business and was part of the total business stock available at the business premises and also observing that provisions of section 115BBE of the Act are applicable from 01.04.2017 and are thus not applicable on the case of assessee as the search was carried out on 15.12.2016 CIT(A) find that the alleged excess stock was not kept separately at any other place and was part of the total business Stock found at the assessee s business premises are sufficient enough to indicate that the alleged investment in excess stock is part of the business income we also find that alleged excess stock was duly accepted by assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during search proceedings and therefore is not an undisclosed income as held by the ld. AO. We, therefore, find no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search - Decided in favour of assessee.
Issues Involved:
1. Whether the value of excess stock declared by the assessee should be treated as unexplained investment under Section 69 of the Income Tax Act. 2. Whether the excess stock found during the search should be considered as unexplained investment under Section 69 or normal business income. 3. Whether the amended provisions of Section 115BBE are applicable to the assessee's case since the search was conducted before the amendment date. Issue-wise Detailed Analysis: 1. Treatment of Excess Stock as Unexplained Investment under Section 69: The Revenue argued that the excess stock of ?1,41,75,568/- found during the search was not recorded in the books and should be treated as unexplained investment under Section 69. The assessee contended that the excess stock was accumulated from regular unaccounted business income. The Tribunal noted that for Section 69 to be invoked, three conditions must be cumulatively satisfied: (i) the assessee made certain investments, (ii) such investments are not recorded in the books, and (iii) the assessee offers no satisfactory explanation about the nature and source of such investments. In this case, while conditions (i) and (ii) were met, the assessee had explained that the excess stock resulted from regular business income, thus condition (iii) was not satisfied. Therefore, Section 69 could not be invoked. 2. Classification of Excess Stock as Business Income: The Tribunal observed that the excess stock found during the search was part of the regular business stock and not kept separately. The assessee’s explanation that the excess stock was generated from the regular business of manufacturing and trading gold ornaments was accepted. The Tribunal cited several judicial precedents supporting the view that additional income declared on account of excess stock should be classified as business income and not unexplained investment. Thus, the Tribunal upheld the CIT(A)’s decision to treat the excess stock as business income and apply the normal tax rate. 3. Applicability of Amended Provisions of Section 115BBE: The Tribunal examined whether the amended provisions of Section 115BBE, which came into effect from 01.04.2017, applied retrospectively to the assessee's case. The search was conducted on 15.12.2016, before the amendment date. The Tribunal referred to the Supreme Court’s ruling in CIT vs. Vatika Township Pvt. Ltd. and other judicial precedents, which held that amendments imposing additional tax cannot be applied retrospectively. Therefore, the Tribunal concluded that the provisions of Section 115BBE were not applicable to the assessee’s case since the search occurred before the amendment date. Conclusion: The Tribunal dismissed the Revenue’s appeal, holding that the excess stock should be treated as business income and not unexplained investment under Section 69. Additionally, the amended provisions of Section 115BBE were not applicable as the search was conducted before the amendment date. The Tribunal upheld the CIT(A)’s decision to apply the normal tax rate to the excess stock and dismissed the Revenue’s grounds of appeal.
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