2024 (9) TMI 1657 - AT - Income Tax

Addition u/s 69B r.w.s. 115BBE - higher rate of taxation regarding the assessee s unaccounted stock conducted during the course of survey - declaration made on account of excess stock found in survey proceedings - main reason for excess stock found was because of unrecorded purchases - HELD THAT - We find no merit in the Revenue s instant sole substantive grievance as this tribunal s recent order in Ashok Kumar Kesherchand Pande 2023 (7) TMI 1498 - ITAT PUNE held admittedly, the income offered during the course of survey proceedings was credited to Profit Loss Account and the additional income offered on account of deficit in the physical stock was credited to Trading Account. The income offered on account of alleged expenditure incurred on construction of the commercial building was offered to tax by crediting the same amount to the Profit Loss Account. Thus, the income was offered to tax under the head Income from business , the Assessing Officer also assessed the same under the head Income from business . Therefore, the presumption is to be drawn that the additional income was derived from the business. Thus, it cannot be said that the source for the additional income remain unexplained and, therefore, the provisions of section 115BBE have no application to the present case. The assessee s survey statement had also explained the reasons of stock deficiency of non-maintenance proper book results in regular business only. We thus adopt the above detailed reasoning mutatis mutandis to uphold the learned CIT(A) s detailed discussion reversing Assessing Officer s action assessing the assessee s entire stock u/sec. 115BBE - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the CIT(A) erred in deleting the tax calculated on special rates under section 69B read with section 115BBE of the Income Tax Act on the declaration of excess stock.
2. Whether the CIT(A) failed to appreciate that the excess stock resulted from unrecorded purchases.
3. Whether the CIT(A) failed to appreciate that the assessee did not explain the nature and source of income for unrecorded purchases, resulting in excess stock.

Issue-wise Detailed Analysis:

1. Deletion of Tax Calculated on Special Rates:

The primary issue is whether the CIT(A) erred in law and facts by deleting the tax calculated on special rates as per the provisions of section 69B read with section 115BBE of the Income Tax Act on the declaration of Rs. 7,00,00,100/- as excess stock. The CIT(A) had reversed the assessment findings, which assessed the unaccounted stock under section 69B at a higher rate under section 115BBE. The appellant argued that the excess stock found during the survey was due to discrepancies in stock maintenance and valuation, with no incriminating evidence of unrecorded sales or purchases. The appellant declared the amount as deemed income to maintain peace of mind, and the CIT(A) held that the additional income was part of business activities, thus not subject to section 115BBE.

2. Excess Stock Resulting from Unrecorded Purchases:

The Revenue contended that the excess stock was due to unrecorded purchases, which the CIT(A) allegedly failed to appreciate. However, the CIT(A) considered that the appellant's books of accounts were not finalized at the time of the survey, and the discrepancies were covered by the declared additional income. The appellant maintained that the excess stock was part of regular business activities, and the CIT(A) found no evidence to support the Revenue's claim of unrecorded purchases leading to the excess stock.

3. Explanation of Nature and Source of Income:

The Revenue argued that the assessee failed to explain the nature and source of income used for unrecorded purchases, resulting in excess stock. The CIT(A) noted that no specific questions were asked during the survey or assessment proceedings to substantiate the manner in which the income was derived. The appellant had declared the additional income as part of business income, and the CIT(A) found that the appellant satisfactorily explained the source of income, which was related to regular business activities.

Conclusion:

The tribunal found no merit in the Revenue's appeal, supporting the CIT(A)'s decision to reverse the Assessing Officer's action of taxing the income under section 69B read with section 115BBE. The tribunal referenced previous case law, including the decision in Ashok Kumar Kesherchand Pande vs. ACIT, where it was held that additional income declared during survey proceedings and credited to business accounts should not be taxed under section 115BBE. The tribunal upheld the CIT(A)'s detailed discussion and dismissed the Revenue's appeal, concluding that the additional income was derived from regular business activities and should be taxed under the normal rate of income tax.