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TMI Blog2023 (2) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... Y.2017-18. 3. The Ld. Senior Departmental Representative ("Sr. DR" for short) supporting the action of the Assessing Officer ("AO" for short) on the issue of chargeability of tax u/s 115BBE of the Income Tax Act, 1961 (for short 'the Act') submitted that the Ld. CIT(A) in the facts and circumstances of the case, was not justified in law allowing the assessee's appeal on the chargeability of tax as per normal rates instead of the amended provisions of section 115BBE of the Act, which is applicable from 01/04/2017 relevant to A.Y. 2017-18. The Ld.Sr. DR for the Revenue submitted that the said provisions is clearly attracted to the present case of the assessee in respect of the surrendered income determined u/s 69B of the Act which was offered for taxation in the return of income filed by the assessee for A.Y. 2017- 18. 3.1 Further drew our attention towards relevant part of the assessment order. The Ld. Sr. DR submitted that the income surrendered by the assessee that during the course of search action in reply to question No.16 to 17 by the statement of the assessee recorded on 29/09/2016, the assessee himself admitted the facts that the excess stock and excess cash found pertains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing but business income of the appellant and therefore, liable to be taxed under the head of income from business and profession only and the AO without making any addition u/s 69A or 69B of the Act accepted the surrendered amount as income from business and profession. He vehemently pointed out that the AO has not bring on record any other evidence suggesting that the additional income was not earned by the declared business activity of the appellant. He also pointed out that the provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68,69,69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017. He further explaining that in the present case the additional income was offered during search and survey operation carried out on 28/09/2016 and the same has been taken into consideration while filing regular return of income u/s 139(1) of the Act and when the assessment has been framed and completed at returned income without making any fresh addition then the AO was not justified in charging tax u/s 115BBE of the Act on the surrendered amount. The Ld. AR, vehemently supporting the first appellate order, submitted that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as granted relief to the assessee by following observations and findings: 4.1 Ground No. 1 to 5:- Through this ground of appeal, the appellant has challenged the chargeability of tax rate under amended provisions of section 115BBE of the Act. During the course of search on 28.09.2016 excess stock in the form of jewellery and silver utensils worth Rs.1,28,48,827/- were found and cash amounting to Rs.1,57,01,227/- was found from residential premises of the appellant. Further, during the course of survey excess stock of jewelleries amounting to Rs.1,67,93,53/- was also found. Statement of appellant was recorded u/s 132(4) & 133A of the Act and appellant made voluntary disclosure of sum of Rs.4,53,43,587/- on account of excess stock and cash found during the course of search and survey. The appellant also stated that the excess stock was acquired out of income earned from forward commodity trading transaction and mediation carried out by the appellant. The appellant filed return of income u/s 139(1) on 31.10.2017 declaring total income of Rs.5,30,55,260/- including additional income of Rs.4,53,43,587/- voluntary declared during the course of search and survey. However, as per AO, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly not applicable to the case of appellant. 4.1.2 Before parting it is most appropriate to refer to the relevant provision of sec 115BBE of the Act as existed before amendment and after amendment w.e.f01.04.2017: Old Provisions before Amendment: "115BBE(1). Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of- (a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). " New Provisions after Amendment: 115BBE(1). Where the total income of an assessee,- (a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not disputed that the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver jewellery. The Coordinate Bench in the case of ChokshiHiralalMaganlal vs. DCIT, 131 TTJ (Ahd.) 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 under section 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 should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 14. To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only. 15. In view of the above, AO is directed to consider the sum of Rs.8,10,011/- as undisclosed business income assessable under the head 'business' and other two sums under section 69. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vey and surrender made thereof was found to be taxable under the head 'business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act. Thus, there is no justification for taxing such income U/s 115BBE of the Act. (f) ACIT Vs. Sanjay Bairathi Gems Ltd - 189 TTJ 487/492 (Jp). In this case, it is held as under:- From the above, it is seen that the excess stock found during the search operation is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the authorized officers during the search operation at the premise. Since excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but is the part of overall physical stock found, the investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es below which are list below:- (i) A search & survey operation was carried out on business premises of appellant. During the said operation additional income was offered on account of excess stock/excess cash found during the course of search & survey operation. (ii) The assessee found additional income during the course of search & survey operation and same was taken into consideration while filing regular return of income u/s. 139(1) of the Act. (iii) The Assessing Officer completed assessment at the return income and no fresh addition was made by the AO. (iv) From the careful perusal assessment order it is also clearly observed that the Assessing Officer has not made any addition to the return of income of assessee and has accepted return income filed by the assessee inclusive of amount of excess stock and excess cash found and offered for taxation during the course of search & survey operation. (v) The assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee. 7. After considering the above factual matrix of the case now we proceed to consider the proposition relied by learned representative of both the sides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and excess cash found during the course of search & survey operation and surrendered during the said operation. The Ld. CIT(DR) has not disputed or controverted very factual position that the assessee filed return of income including the surrendered amount and which was accepted by the Assessing Officer without any dispute and without making any further addition in the hands of assessee u/s. 69A or any other section of the Act. In view of above as the assessee has successfully explained and established the source of excess stock and excess cash as his business activity and of trading in jewellery and gems and activity of Adat/dalali thus the benefit of proposition rendered by Hon'ble Punjab & Haryana High Court in the case Kim Pharma (P.) Ltd. vs. Commissioner of Income Tax (supra) is not available for the department in the present case. 8. In view of forgoing discussion we reach to a logical conclusion that the Assessing Officer without making any addition u/s. 69A or any other provision of the Act has accepted returned income of the assessee wherein the assessee has included surrendered amount on account of excess stock and excess cash as business income and has successfully exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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