2024 (1) TMI 604 - AT - Income Tax

Excess Stock of gold and silver jewellery and Cash found in Survey u/s 133A - deemed income u/s 69-69A or business income - HELD THAT - When we analyze the facts of the assessee s case with reference to requirements of Section 69 of the Act, it is observed that admittedly, the investment in the purchase of 5246.335 gms gold and 16.3793 kg Silver is not recorded in the books. The assessee has not offered any satisfactory explanation for the impugned investment. Thus the requirement of Section 69 are fulfilled in this case. Hence, we are of the opinion that the Assessing Officer has rightly invoked section 69 of the Act for the impugned investment in the purchase of 5246.335 gms gold and 16.3793 kg Silver. Therefore, we uphold invocation of section 69 of the Act by AO. Accordingly ground number 2 of the assessee regarding impugned stock is dismissed. Excess cash found during the survey - Assessee has not offered any specific explanation with reference to excess cash found during the survey. Therefore, we are of the opinion that the AO has rightly invoked section 69A. Invokation of provisions of Section 115BBE - Section 115BBE is specifically applicable where income of the assessee includes any income under section 69, 69A of the Act. As per the Income tax Act , once income of assessee includes any income referred in section 69,69A the Tax has to be calculated as per provisions of Section 115BBE. In this case we have already held that section 69 and 69A was rightly invoked by the AO. Therefore, since income of the assessee contains income referred u/s 69, 69A, provisions of Section 115BBE are applicable in the case of the assessee. Sub-clause 2 of Section 115BBE specifically states that no deduction in respect of any expenditure, allowance under any provision of this act in computing income referred under subclause 1 of section 115BBE means income referred u/s 69, 69A of the Act. Therefore, the AO was right in disallowing the assessee s claim of Partner s Salary on the impugned unexplained investment taxed u/s 69 and 69A of the Act. Accordingly the ground of appeal number 3 of the assessee is dismissed.

Summary

Issues Involved:
The issues involved in this case are:
1. Treatment of excess stock and cash found in survey as deemed income under sections 69-69A instead of business income.
2. Disallowance of salary to working partners by the Income-Tax Officer.

Issue 1: Treatment of Excess Stock and Cash:
The assessee firm, engaged in retail sale of Gold and Silver ornaments, had excess stock of Gold and Silver along with cash found during a survey. The Assessing Officer held that the unexplained investment in excess stock is assessable under section 69 and excess cash under section 69A. The assessee challenged this before the Tribunal, arguing that the excess stock should be considered as business income. However, the Tribunal upheld the AO's decision, stating that the investment in the unexplained stock was not recorded in the books, fulfilling the requirements of section 69. Similarly, no specific explanation was provided for the excess cash, leading to the invocation of section 69A. The Tribunal found that the AO rightly applied these sections, resulting in the dismissal of the appeal on this ground.

Issue 2: Disallowance of Salary to Working Partners:
The assessee claimed a deduction for partners' salary related to the excess stock found during the survey. The AO disallowed this claim, citing the application of Section 115BBE due to income under sections 69 and 69A. The Tribunal agreed with the AO's decision, stating that since the income of the assessee included amounts under sections 69 and 69A, the provisions of Section 115BBE were applicable. As per Section 115BBE, no deduction in respect of any expenditure or allowance is allowed in computing such income. Therefore, the disallowance of the partners' salary on the unexplained investment was upheld, leading to the dismissal of the appeal on this ground.

Case Laws Discussion:
The assessee relied on various case laws to support their arguments. However, the Tribunal found that the facts of the present case were distinguishable from the cases cited by the assessee. The Tribunal analyzed each case law and concluded that they were not directly applicable to the current situation due to differences in facts and legal provisions. Therefore, the Tribunal dismissed the appeal on the grounds raised by the assessee.

Conclusion:
After considering the arguments and evidence presented by both parties, the Tribunal found in favor of the Assessing Officer's decision. The Tribunal upheld the treatment of excess stock and cash as deemed income under sections 69 and 69A, respectively. Additionally, the disallowance of the partners' salary was deemed appropriate under Section 115BBE. The Tribunal dismissed the appeal on all grounds raised by the assessee, leading to the rejection of the appeal.