9911796707
TMI Blog2023 (9) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... course of survey was available for trade at the business premise of the assessee and it was part and parcel of the regular business stock. Once, it is considered as regular business stock, then, obviously the source for acquisition of said stock is out of business income earned for the relevant assessment year, because, it is a general practice in business that whatever excess income earned is kept in the form of stock and debtors. Since, the excess stock found during the course of survey was not separately identified and was mixed with regular business income, the assessee has rightly offered additional income declared during the course of survey under the head income from business profession , and this position is supported by the decision of the Rajasthan High Court in the case of CIT v. Bajargan Traders [ 2017 (11) TMI 388 - RAJASTHAN HIGH COURT] Thus we are of the considered view that the AO and the Ld.CIT(A) are erred in assessing additional income declared towards excess stock found during the course of survey u/s. 69B r.w.s. 115BBE of the Act, and thus, we direct the AO to assess the income under the head income from business profession as declared by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit earned over the years of business conducted, and part of the business income. 6. The Learned CIT(A) has failed to realize that the Appellant has only offered the said sum to income to buy peace with the department. 7. The Learned CIT(A) overlooked a plethora of cases in favour of the Appellant's claim and dismissed the appeal without going into the relied case laws 8. The Learned CIT(A) has failed to understand the facts of the case and passed the arbitrary order. For these and other grounds that may be rendered at the tone of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the Appellants claim and thus render justice. 3. The brief facts of the case are that the assessee is an individual and engaged in the business of purchase and sale of gold, silver diamond jewellery in the name and style of M/s.Shanthi Swarna Mahal, a proprietary concern. In this case, a survey u/s. 133A of the Income Tax Act, 1961 (in short the Act ), was carried out in the business premises of the assessee on 22.02.2018. During the course of survey proceedings, excess stock to the extent of Rs. 49,20,771/- was found. Further, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.1 I have considered the submissions of the appellant. The assessee has disclosed the excess stock amounting to Rs. 49,20,771/- and unaccounted marriage expenditure of Rs. 25 lakhs as his undisclosed income during the survey; such disclosure was backed by stock inventory taken at the time of survey and from the statement recorded during survey. Therefore, the disclosure is not just based on a bald statement, but has been backed by the physical stock inventory and. inquiries based on the books of accounts of the assessee. The assessee has also duly shown it as income (Rs.74,20,771/-) in its return of income. The assessee has come up with this appeal primarily because he is of the opinion that the excess stock found during survey was generated out of his business and hence it has to be taxed as business income (subject to 30% tax), whereas the AO has taxed it as undisclosed investment (subject to tax rate of 60% u/s 115BBE). Similarly, the assessee is of the opinion that the source for unaccounted marriage expenses also emerged from business. However, he has not given any evidence to back his opinions. The assessee has duly included the unaccounted income offered during the surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat effect. In the lack of positive evidence for business income as source, the only possibility is to assess excess stock as income from other sources - unexplained investment u/s 69B arid the unexplained marriage expenditure as unexplained expenses u/s. 69C. In fact, the financials of the assessee supports this stand of revenue: Sri Santhilal Jain Vijay Kumar 19/21, Asaliamman Koil Street, Tiruvannamalai AY 2018-19 PAN: AADPV 0516 B V-5a Profit Loss A/c for the year ending 31st March, 2018 Particulars Amount Particulars Amount To interest paid 4,43,940.00 By interest from - Karur Vysya Bank 18,717.00 To Misc. Expenses 3,71,010.00 By weighing Charges 15,980.00 By net profit trs. From: - M/s.Shanthi Swarna Mahal A/c 28,37,583.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any evidence. The assessee puts the cart before the bull by stating that the AO failed to establish any nexus between the disclosure made by the appellant and the applicability of section 115BBE: Rather the initial onus is on the assessee to state how the undisclosed income offered during survey backed by clear evidence has emerged from business; no iota of evidence furnished by the assessee to discharge the initial burden of proof on him; on the contrary, the evidences unearthed during survey and the financials furnished above supports the assessment of excess stock u/s. 69B and unexplained expenses u/s 69C. 7.9 Similar issue had come up for consideration before the jurisdictional Madras High court in the case of Ms. SVS Oils Mills Vs. The Assistant Commissioner of Income Tax in ITA No.765 of 2018 wherein it was clearly held that the investment in excess stock found should be assessed as undisclosed income and not as business income. It is well settled principle of law that if there is conflicting views rendered by different High Courts, the view taken by the jurisdictional High Court is binding in the jurisdictional area of the respective High Court. The Hon ble Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sr.DR supporting the order of the Ld.CIT(A) submits that during the course of survey, excess quantity of physical stock was found over and above book stock and the assessee could not explain source for excess stock found during the course of survey. Further, the assessee admitted to have spent Rs. 25 lakhs towards his son s marriage and source for said expenditure was not explained. Therefore, the AO and the Ld.CIT(A) has rightly assessed additional income offered during the course of survey u/s. 69B of the Act, and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. During the course of survey excess stock was found when compared to book stock. The assessee has offered additional income towards excess stock found during the course of survey and also paid necessary taxes by offering income under the head income from business profession . The AO assessed excess stock found during the course of survey u/s. 69B of the Act, as unexplained investment on the ground that the assessee could not explain source for excess stock found during the course of survey. We find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register. Accordingly, the differential was separately offered to tax in the return of income as Business Income . Naturally, the excess stock was acquired out of excess income regenerated from business activity only since the assessee do not have any other source of income since its inception. The entire stock was accumulated out of income from jewellery business. The undisclosed business income was ploughed back into business to acquire further stock. In such a case, the excess stock could be said to have arisen out of normal business activity only and therefore, the same would be assessable as business income only in terms of decision of Hon ble Rajasthan High Court in the case of CIT vs Bajargan Traders (supra) wherein it was held that with respect to such excess stock found during the survey, it could be said that the investment in procurement of such stock was clearly identifiable and related to regular business stock of the assessee. Therefore, the same should be considered as Business Income only. In the present case, the stock difference has arisen in the course of day-to-day business activity only and not otherwise. The entire stock was available as trading stock at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment. In the present case, the AO and the Ld.CIT(A) completely erred in assessing additional income offered towards marriage expenses u/s. 69B of the Act. Therefore, on this count itself, additions made by the AO cannot be sustained. Be that as it may. The assessee has explained source for marriage expenses and stated that such expenditure has been incurred out of business income earned for the impugned assessment year. The AO never disputed the fact that the assessee does not have any other source of income except income from business profession. Once it is accepted the fact that the assessee does not have any other source of income, then obvious conclusion is that said expenditure is incurred out of business income of the assessee. Since, the assessee has already offered additional income of Rs. 25 lakhs towards marriage expenses under the head income from business profession , in our considered view, the AO ought not have assessed said income as unexplained investment u/s. 69B of the Act. The Ld.CIT(A) without considering the relevant facts simply upheld the additions made by the AO and thus, we reversed the findings of the Ld.CIT(A) and direct the AO to assess income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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