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2022 (7) TMI 536 - AT - Income TaxAddition on account of excess stock of jewellery found during survey - addition u/s 69A and not under Income from Business - HELD THAT - On a consideration of the same on going through the PMGKY Scheme alongwith the Circular No. 2 and 9 of 2017 which clarify the Scheme considering the facts of the peculiar case, we find that in the facts of the present case, the AO incorrectly invoked Section 69A of the Act and the ld. CIT(A) on facts was not justified to sustain the addition so made. In the facts of the present case, accordingly, we are of the view that the order cannot be sustained. We have duly taken into consideration the facts as available in the respective orders of the ITAT. It is seen that the assessee is dealing in gold and silver jewellery etc. and the discrepancies in the silver jewellery cannot be arbitrarily said to be from an unexplained source as no such fact or allegation has either been made in the Survey or referred to by the AO. The discrepancy in the silver stock was in the regular course of the business of the assessee. We have taken into consideration the Surrender Letter dated 22.03.2017 filed by the assessee. It is a matter of fact that the surrender has been honoured and has not been retracted by the assessee. On a careful reading of the specific reasons for surrendering the income wherein very clearly the assessee states that; it is submitted that certain discrepancies were observed related to cash deposit/income etc. However, is, order to by peace of mind and to avoid any litigation and is order to settle the group cases of the persons covered - The wordings are very clear and categoric. We have taken into consideration the PMGKY Scheme 2016 and have also taken into consideration two Circulars which clarify those i.e. Circular No. 2/2017 and 9/2017. We have also taken into consideration the specific questions put to Shri Sachin Aggarwal, Partner. We have taken into consideration the Circular No. 2/2017 and 9/2017 and Paper Book page 59. On a careful consideration of the facts and evidences on record, we find that the addition cannot be sustained. Accordingly, on a consideration of facts on record, the specific Scheme, Surrender letter and case law relied upon, we are of the view that the addition cannot be sustained. Allowing the appeal of the assessee, the addition is directed to be deleted. Appeal of assessee allowed.
Issues Involved:
1. Confirmation of addition by CIT(A) of Rs. 8,60,778/- on account of excess stock of jewelry found during survey. 2. Application of Section 69A instead of treating it as Income from Business. 3. Application of tax rate under Section 115BBE. 4. Non-consideration of discrepancies of stock against Income offered under PMGKY. Detailed Analysis: 1. Confirmation of Addition by CIT(A) of Rs. 8,60,778/- on Account of Excess Stock of Jewelry Found During Survey: The assessee, a partnership firm, was subjected to a search and seizure operation as well as a survey operation under sections 132(1) and 133A of the Income Tax Act on 21.03.2017. During the survey, excess silver stock of 24.104 Kg was found, which was not recorded in the books of accounts. The assessee contended that this discrepancy was covered under a disclosure of Rs. 3 Crores made under the Pradhan Mantri Garib Kalyan Yojana (PMGKY). The Assessing Officer (AO) rejected this explanation and made an addition of Rs. 8,60,778/- under Section 69A of the Income Tax Act, which was confirmed by the CIT(A). 2. Application of Section 69A Instead of Treating it as Income from Business: The assessee argued that the excess silver stock was a trading item and should be treated as business income rather than unexplained income under Section 69A. The AO and CIT(A) did not accept this argument, maintaining that the unexplained stock should be treated as unexplained money under Section 69A or as an unexplained investment under Section 69B. 3. Application of Tax Rate Under Section 115BBE: The AO applied the tax rate under Section 115BBE, which pertains to tax on income referred to in Sections 68, 69, 69A, 69B, 69C, and 69D. The assessee contested this application, arguing that the income should be treated as business income and not under Section 69A. 4. Non-Consideration of Discrepancies of Stock Against Income Offered Under PMGKY: The assessee had made a disclosure of Rs. 3 Crores under PMGKY to cover discrepancies found during the survey, which included the excess silver stock. The AO and CIT(A) did not consider this disclosure while making the addition. The assessee argued that the PMGKY scheme allowed for the declaration of undisclosed income for assessment years up to 2017-18 and that the discrepancies, including the excess silver stock, were covered under this scheme. Tribunal's Findings: The Tribunal found that the AO incorrectly invoked Section 69A and that the CIT(A) was not justified in sustaining the addition. The Tribunal noted that the discrepancies in the silver stock were in the regular course of the assessee's business. The Tribunal also considered the PMGKY scheme and the Circulars No. 2/2017 and 9/2017, which clarified the scheme. The Tribunal concluded that the addition could not be sustained as the discrepancies were covered under the PMGKY disclosure. Conclusion: The Tribunal allowed the appeal of the assessee and directed the deletion of the addition of Rs. 8,60,778/-. The Tribunal emphasized that the discrepancies in the silver stock were part of the regular business and were covered under the PMGKY scheme. The addition under Section 69A was deemed incorrect, and the income was to be treated as business income. The order was pronounced on 23rd June 2022.
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