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TMI Blog2017 (11) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... urrendered by the assessee by holding that such amount was included in the purchases and was reflected in the sales and closing stock, specifically when the assessee failed to show that the said amount was included in the sales and closing stock? ii) Whether the Tribunal was legally justified in treating the investment in excess stock for Rs. 70,04,814/- found during the course of survey as 'business income' instead of 'income from other sources' which was to be liable to tax u/s 69? iii) Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and deleting the addition of Rs. 1,39,366/- made on account5 of less interest charged by the firm from the wife of one of the partner specifically when the interest wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 1 has held that in a cases where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of Rs. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the assessee is allowed. 3.2. The ld. AR of the assessee submitted that at the outset, it may be noted that the AO has made addition on account of notional interest of Rs. 1,39,366/-. There cannot be any addition on account of notional income as held by the Hon'ble Supreme Court in case of E.D. Sassoon & Co. & Ors. vs. CIT (1954) 26 ITR 27 and Godhra Electricity Co. Ltd. vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, neither the addition of notional interest made by the AO or disallowance of interest as held by the ld. CIT(A) is Rs. 1,96,73,637/-. Partners are paid interest @ 12% the balance in the partners account is much more than the amount advanced to Smt. Rita Gupta who is a wife of one of the partner. Therefore, even the disallowance made @ 4% is not justified and the same should be restricted @ 2% only. Reliance is also placed on the following cases.
CIT vs. Ram Kishan Verma (2016) 132 DTR 107/132 Taxman 107 (Raj.)(HC)
CIT vs. Vijay Solvex Ltd. (2015) 113 DTR 382 (Raj.) (HC)
4. We are in complete agreement with the view taken by the Tribunal. No substantial question of law arises.
5. Hence, the appeal stands dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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